The US central bank cut interest rates on Wednesday, marking the second rate cut this year during economic turbulence originating from the government closure and trade duties.
Decision Arrives at Unprecedented Moment 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 unprecedented juncture for the central bank. The institution has been under immense pressure to lower borrowing costs despite ongoing price increases.
Central Bank Announcement Notes Job Market Shifts
In a statement, the Fed said that the jobless rate had increased but remains low. “Job gains have slowed,” the statement notes. “Inflation has moved up and remains somewhat elevated.”
Federal Closure Complicates Central Bank’s Task
The continuing government stoppage, now one of the longest in American history, has also hindered the central bank’s task. Gathering of key financial statistics has been indefinitely halted as employees at the Bureau of Labor Statistics are furloughed during the shutdown.
Data Gap Affects Policy Decisions
The Federal Reserve typically analyzes labor statistics to determine labor market conditions, such as the number of new jobs created to the market and the present unemployment rate. The most recent employment data was published in early September, prior to the shutdown, and gave a somewhat gloomy snapshot of the jobs market in the previous month.
The number of positions created to the market in August was lower by over 100k since the spring, and unemployment rose to four point three percent – the highest since three years ago.
Private Data Show Continued Slowdown
Though the bureau was set to release September’s employment data in the start of last month, it halted its release when the shutdown began. Employment data company a leading payroll processor indicated recently that the business segment cut 32,000 jobs in last month, a sign that the employment landscape is still decelerating.
“Supply as well as demand for workers has fallen significantly,” central bank head the Fed chairman said recently, a trend he had previously said stems from trade and immigration measures.
Inflation Report Reveals Moderate Rise
Though the bureau’s jobs report has been paused, the agency still released its inflation report for September that showed that costs are going up, although gradually. Costs rose 3% over the past twelve months, the highest since January. In spring, the annual inflation rate was 2.3%, the minimum it has been since three years ago. The Fed’s target inflation rate is 2%.
