The US central bank lowered interest rates on Wednesday, marking the second rate cut this year during financial volatility originating from the federal government shutdown and trade duties.
Move Arrives at Extraordinary Time for Central Bank
The move to cut the key rate by a quarter point to a range of 3.75% to 4% comes at an extraordinary juncture for the Fed. The institution has been under significant strain to lower borrowing costs despite persistent inflation.
Central Bank Announcement Highlights Labor Market Changes
In a announcement, the Fed said that the jobless rate had gone up but stays modest. “Job gains have slowed,” the statement reads. “Price increases has moved up and remains moderately high.”
Government Shutdown Hinders Fed’s Job
The ongoing federal government shutdown, now one of the longest in American history, has also hindered the central bank’s task. Collection of key financial statistics has been indefinitely halted as employees at the BLS are on leave during the shutdown.
Information Shortage Affects Monetary Moves
The Federal Reserve usually analyzes labor statistics to determine labor market conditions, including the number of new jobs created to the market and the present unemployment rate. The last jobs report was published in early September, prior to the closure, and gave a relatively bleak snapshot of the employment scene in August.
The number of jobs added to the economy in August was lower by more than 100,000 since the earlier season, and unemployment rose to four point three percent – the highest since three years ago.
Alternative Reports Indicate Continued Decline
Though BLS was set to release September’s employment data in early October, it suspended its release once the shutdown started. Employment data company a leading payroll processor reported earlier this month that the business segment eliminated 32,000 jobs in September, a indication that the employment landscape is continuing to slow.
“Both the supply and demand for labor has fallen quite sharply,” Fed chair Jerome Powell said recently, which he had previously said comes from trade and immigration measures.
Price Data Reveals Moderate Increase
Though the bureau’s employment data has been suspended, the agency still issued its price statistics for last month that showed that prices are going up, although slowly. Prices rose three percent over the last year, the highest since the start of the year. In spring, the annual inflation rate was 2.3%, the minimum it has been since three years ago. The central bank’s goal inflation rate is two percent.
