The US monetary authority lowered borrowing costs on Wednesday, marking the second reduction this year amid financial volatility stemming from the federal government shutdown and trade duties.
Move Comes at Unprecedented Moment for Federal Reserve
The move to reduce the benchmark interest rate by a quarter point to a range of 3.75% to 4% arrives at an extraordinary moment for the Fed. The authority has been under significant strain to cut rates even with ongoing price increases.
Central Bank Announcement Notes Labor Market Shifts
In a announcement, the Federal Reserve said that the jobless rate had increased but remains low. “Job gains have slowed,” the release reads. “Inflation has risen and stays somewhat elevated.”
Federal Closure Complicates Fed’s Job
The ongoing federal government shutdown, now one of the longest in US history, has also complicated the central bank’s task. Gathering of important economic data has been indefinitely halted as staff at the BLS are on leave during the shutdown.
Information Shortage Affects Monetary Moves
The Federal Reserve typically analyzes BLS data to determine labor market conditions, including the number of employment gains added to the economy and the present jobless percentage. The last jobs report was released in early September, before the closure, and gave a somewhat gloomy overview of the employment scene in August.
The number of jobs created to the economy in August was down by over 100k since the spring, and unemployment rose to 4.3% – the peak since three years ago.
Private Data Show Continued Slowdown
Though BLS was scheduled to publish last month’s employment data in the start of last month, it suspended its publication when the closure began. Employment data company a leading payroll processor indicated earlier this month that the business segment eliminated 32,000 jobs in September, a sign that the job market is still decelerating.
“Supply as well as demand for labor has fallen quite sharply,” central bank head the Fed chairman said recently, a trend he had previously attributed stems from trade and immigration measures.
Inflation Report Shows Gradual Increase
Though BLS’s employment data has been suspended, the bureau still released its price statistics for last month that showed that costs are rising, albeit gradually. Prices rose three percent over the past twelve months, the highest since the start of the year. In April, the annual inflation rate was 2.3%, the minimum it has been since three years ago. The central bank’s goal price increase is 2%.
