The US central bank reduced interest rates on Wednesday, marking the second reduction this year amid economic turbulence originating from the government closure and trade duties.
Decision Comes at Extraordinary Moment for Federal Reserve
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 Fed. The institution has been under significant strain to lower borrowing costs despite ongoing price increases.
Central Bank Announcement Highlights Labor Market Shifts
In a announcement, the Federal Reserve stated that the unemployment rate had gone up but remains low. “Job gains have slowed,” the release notes. “Inflation has moved up and stays moderately high.”
Government Shutdown Complicates Fed’s Job
The continuing government stoppage, now one of the longest in US history, has also hindered the Fed’s job. Collection of key economic data has been suspended without a timeline as employees at the Bureau of Labor Statistics are on leave during the shutdown.
Data Gap Affects Policy Decisions
The Federal Reserve usually studies labor statistics to determine employment trends, such as the count of employment gains created to the market and the present jobless percentage. The most recent employment data was published in the beginning of last month, before the closure, and provided a relatively bleak overview of the jobs market in August.
The number of positions created to the market in August was lower by over 100k since the earlier season, and joblessness rose to four point three percent – the peak since three years ago.
Alternative Reports Indicate Continued Slowdown
Though the bureau was set to release September’s job market report in early October, it halted its publication once the closure started. Employment data company a leading payroll processor indicated earlier this month that the private sector eliminated 32,000 positions in September, a indication that the job market is continuing to slow.
“Supply as well as demand for labor has fallen significantly,” Fed chair Jerome Powell said earlier this month, which he had previously said comes from trade and immigration measures.
Price Data Reveals Moderate Increase
Though BLS’s employment data has been suspended, the bureau still issued its inflation report for last month that showed that prices are rising, albeit slowly. Prices increased 3% over the last year, the highest since January. In spring, the yearly price increase was two point three percent, the minimum it has been since three years ago. The Fed’s target price increase is two percent.
