The United States monetary authority cut borrowing costs on Wednesday, marking the second rate cut this year amid economic turbulence originating from the federal government shutdown and trade duties.
Move Comes at Extraordinary Moment for Central Bank
The move to cut the key rate by a 0.25% to a range of 4% to 3.75% comes at an unprecedented juncture for the central bank. The institution has been under immense pressure to lower borrowing costs despite ongoing price increases.
Fed Statement Notes Labor Market Changes
In a statement, the Federal Reserve said that the unemployment rate had increased but remains low. “Job gains have slowed,” the release reads. “Price increases has risen and stays moderately high.”
Federal Closure Complicates Fed’s Job
The continuing federal government shutdown, now among the lengthiest in American history, has also complicated the central bank’s task. Gathering of important financial statistics has been indefinitely halted as employees at the Bureau of Labor Statistics are on leave during the closure.
Data Gap Affects Monetary Moves
The Federal Reserve typically studies BLS data to assess labor market conditions, such as the count of new jobs created to the economy and the present unemployment rate. The last jobs report was released in the beginning of last month, before the shutdown, and gave a relatively bleak overview of the jobs market in August.
The number of jobs added to the economy in the summer month was lower by over 100k since the spring, and unemployment crept up to four point three percent – the highest since three years ago.
Alternative Reports Indicate Continued Decline
Though BLS was set to publish last month’s employment data in early October, it suspended its publication once the closure started. Private payroll firm a leading payroll processor reported earlier this month that the business segment cut thirty-two thousand positions in September, a indication that the employment landscape is continuing to slow.
“Both the supply and demand for workers has fallen significantly,” Fed chair Jerome Powell said earlier this month, a trend he had earlier attributed comes from trade and immigration measures.
Price Data Reveals Moderate Rise
Though BLS’s employment data has been paused, the agency still released its inflation report for September that indicated that costs are going up, albeit gradually. Costs rose three percent over the last year, the highest since January. In spring, the annual inflation rate was two point three percent, the lowest it has been since three years ago. The central bank’s goal inflation rate is two percent.
