The US monetary authority cut borrowing costs on Wednesday, marking the second reduction in the current year amid economic turbulence stemming from the federal government shutdown and trade duties.
Move Arrives at Extraordinary Time for Federal Reserve
The decision to cut the key rate by a 0.25% to a span of 3.75% to 4% comes at an unprecedented moment for the central bank. The authority has been under significant strain to cut rates even with ongoing price increases.
Central Bank Announcement Notes Job Market Changes
In a announcement, the Fed said that the unemployment rate had increased but remains low. “Job gains have decelerated,” the release reads. “Inflation has moved up and stays moderately high.”
Government Shutdown Complicates Fed’s Job
The continuing federal government shutdown, now one of the longest in American history, has also complicated the Fed’s job. Gathering of important financial statistics has been suspended without a timeline as employees at the BLS are on leave during the closure.
Data Gap Affects Monetary Moves
The Fed typically analyzes labor statistics to determine employment trends, including the number of employment gains added to the market and the current jobless percentage. The most recent employment data was released in the beginning of last month, prior to the closure, and provided a relatively bleak snapshot of the jobs market in August.
The number of positions created to the market in the summer month was down by more than 100,000 since the spring, and unemployment crept up to four point three percent – the highest since three years ago.
Alternative Reports Show Ongoing Slowdown
Though BLS was scheduled to publish last month’s employment data in early October, it suspended its publication once the closure began. Employment data company a leading payroll processor reported earlier this month that the private sector cut 32,000 jobs in last month, a indication that the job market is continuing to slow.
“Both the supply and demand for workers has fallen quite sharply,” Fed chair Jerome Powell said recently, a trend he had earlier said stems from trade and immigration measures.
Inflation Report Reveals Moderate Rise
Though BLS’s jobs report has been paused, the bureau still released its price statistics for September that indicated that costs are going up, albeit slowly. Prices rose 3% over the last year, the highest since the start of the year. In spring, the yearly price increase was 2.3%, the lowest it has been since three years ago. The central bank’s goal price increase is two percent.
