The US monetary authority reduced borrowing costs on midweek, representing the second rate cut this year amid economic turbulence originating from the federal government shutdown and trade duties.
Move Comes at Extraordinary Moment for Federal Reserve
The move to cut the key rate by a quarter point to a range of 3.75% to 4% arrives at an extraordinary moment for the central bank. The authority has been under immense pressure to lower borrowing costs despite persistent inflation.
Central Bank Announcement Highlights Job Market Shifts
In a statement, the Fed said that the jobless rate had gone up but stays modest. “Employment growth have decelerated,” the release notes. “Inflation has risen and remains moderately high.”
Federal Closure Hinders Central Bank’s Task
The continuing government stoppage, now one of the longest in US history, has also complicated the central bank’s task. Gathering of key economic data has been indefinitely halted as staff at the BLS are furloughed during the closure.
Data Gap Impacts Policy Decisions
The Fed typically analyzes labor statistics to assess employment trends, such as the number of employment gains added to the market and the current unemployment rate. The last jobs report was published in early September, prior to the shutdown, and gave a somewhat gloomy snapshot of the employment scene in August.
The figure of jobs added to the market in the summer month was down by over 100k since the earlier season, and unemployment rose to four point three percent – the highest since three years ago.
Private Data Show Continued Decline
Though BLS was set to release September’s employment data in the start of last month, it halted its publication once the shutdown started. Private payroll firm a leading payroll processor indicated earlier this month that the private sector eliminated 32,000 positions in September, a indication that the employment landscape is continuing to slow.
“Both the supply and demand for workers has declined quite sharply,” Fed chair Jerome Powell stated recently, which he had earlier attributed stems from trade and immigration measures.
Price Data Shows Gradual Increase
Though BLS’s employment data has been suspended, the bureau still issued its price statistics for September that showed that prices are rising, albeit gradually. Costs increased 3% over the last year, the peak since the start of the year. In spring, the yearly price increase was 2.3%, the minimum it has been since three years ago. The central bank’s goal price increase is two percent.
