The US central bank lowered interest rates on Wednesday, marking the second rate cut this year during financial volatility stemming from the government closure and trade duties.
Decision Arrives at Extraordinary Time for Federal Reserve
The move to cut the benchmark interest rate by a quarter point to a span of 4% to 3.75% comes at an extraordinary moment for the central bank. The institution has been under immense pressure to lower borrowing costs even with persistent inflation.
Central Bank Announcement Highlights Labor Market Shifts
In a announcement, the Fed said that the unemployment rate had gone up but stays modest. “Job gains have decelerated,” the release notes. “Price increases has moved up and stays moderately high.”
Government Shutdown Hinders Fed’s Job
The ongoing federal government shutdown, now one of the longest in US history, has also hindered the central bank’s task. Collection of key financial statistics has been indefinitely halted as staff at the BLS are furloughed during the shutdown.
Information Shortage Affects Policy Decisions
The Federal Reserve usually studies BLS data to determine labor market conditions, such as the count of new jobs created to the economy and the current 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 employment scene in August.
The figure of positions added to the market in August was down by more than 100,000 since the earlier season, and joblessness crept up to four point three percent – the peak since three years ago.
Private Data Show Continued Decline
Though the bureau was set to release September’s employment data in the start of last month, it halted its release when the closure started. Employment data company ADP reported recently that the private sector cut 32,000 positions in September, a sign that the job market is still decelerating.
“Both the supply and demand for labor has fallen significantly,” Fed chair the Fed chairman stated earlier this month, a trend he had previously said comes from trade and immigration measures.
Inflation Report Reveals Moderate Rise
Though BLS’s employment data has been paused, the bureau still released its price statistics for last month that indicated that costs are going up, albeit gradually. Costs rose 3% over the last year, the highest since January. In April, 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.
