The US central bank lowered interest rates on Wednesday, representing the second rate cut in the current year during economic turbulence originating from the federal government shutdown and trade duties.
Decision Comes at Unprecedented 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 unprecedented juncture for the Fed. The authority has been under significant strain to cut rates despite ongoing price increases.
Fed Statement Highlights Job Market Shifts
In a announcement, the Federal Reserve stated that the jobless rate had gone up but stays modest. “Employment growth have decelerated,” the statement reads. “Inflation has risen and stays somewhat elevated.”
Federal Closure Complicates Central Bank’s Task
The continuing government stoppage, now one of the longest in US history, has also complicated the central bank’s task. Gathering of important economic data has been suspended without a timeline as employees at the Bureau of Labor Statistics are furloughed during the shutdown.
Data Gap Affects Monetary Moves
The Fed typically studies BLS data to determine labor market conditions, such as the number of new jobs added to the economy and the current unemployment rate. The most recent employment data was published in the beginning of last month, before the shutdown, and provided a somewhat gloomy snapshot of the employment scene in August.
The number of jobs added to the market in August was down by over 100k since the earlier season, and unemployment crept up to 4.3% – the highest since three years ago.
Private Data Indicate Ongoing Decline
Though BLS was set to release September’s job market report in early October, it suspended its release once the closure started. Private payroll firm ADP indicated recently that the private sector cut thirty-two thousand jobs in last month, a sign that the employment landscape is still decelerating.
“Both the supply and demand for labor has declined significantly,” Fed chair Jerome Powell stated recently, a trend he had earlier attributed 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 September that indicated that prices are rising, albeit gradually. Costs rose three percent over the past twelve months, the peak since January. In April, 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.
