The US central bank cut borrowing costs on midweek, representing the second rate cut this year during financial volatility stemming from the federal government shutdown and trade duties.
Move Arrives at Unprecedented Time for Federal Reserve
The move to reduce the benchmark interest rate by a 0.25% to a range of 3.75% to 4% arrives at an extraordinary moment for the Fed. The institution has been under immense pressure to cut rates despite persistent inflation.
Fed Statement Notes Job Market Changes
In a announcement, the Fed stated that the unemployment rate had gone up but remains low. “Job gains have slowed,” the statement reads. “Price increases has risen and remains moderately high.”
Government Shutdown Complicates Fed’s Job
The ongoing government stoppage, now one of the longest in US history, has also complicated the central bank’s task. Gathering of important financial statistics has been indefinitely halted as staff at the Bureau of Labor Statistics are furloughed during the closure.
Data Gap Impacts Monetary Moves
The Federal Reserve usually analyzes labor statistics to determine labor market conditions, such as the count of new jobs created to the economy and the current unemployment rate. The last jobs report was published in the beginning of last month, before the closure, and gave a somewhat gloomy overview of the jobs market in August.
The number of jobs added to the market in the summer month was down by over 100k since the spring, and unemployment crept up to 4.3% – the highest since three years ago.
Alternative Reports Show Ongoing Decline
Though BLS was scheduled to release September’s job market report in the start of last month, it suspended its release when the shutdown began. Private payroll firm ADP indicated recently that the business segment cut 32,000 positions in last month, a indication that the employment landscape is still decelerating.
“Supply as well as demand for labor has declined quite sharply,” Fed chair Jerome Powell stated earlier this month, which he had previously said stems from trade and immigration measures.
Price Data Shows Gradual Increase
Though BLS’s employment data has been paused, the agency still issued its inflation report for last month that indicated that prices are going up, albeit gradually. Costs rose 3% over the past twelve months, the peak since the start of the year. In April, the yearly price increase was 2.3%, the minimum it has been since three years ago. The Fed’s target price increase is two percent.
