The US central bank reduced borrowing costs on Wednesday, marking the second rate cut this year during financial volatility stemming from the federal government shutdown and trade duties.
Decision Comes at Unprecedented Moment for Federal Reserve
The move to reduce the key rate by a quarter point to a range of 4% to 3.75% comes at an unprecedented moment for the central bank. The authority has been under significant strain to lower borrowing costs even with ongoing price increases.
Central Bank Announcement Highlights Labor Market Shifts
In a statement, the Fed said that the unemployment rate had gone up but stays modest. “Employment growth have decelerated,” the statement reads. “Inflation has moved up and stays moderately high.”
Government Shutdown Complicates Fed’s Job
The ongoing government stoppage, now one of the longest in American history, has also complicated the central bank’s task. Gathering of key financial statistics has been suspended without a timeline as employees at the BLS are on leave during the closure.
Information Shortage Affects Policy Decisions
The Federal Reserve usually analyzes BLS data to assess labor market conditions, including the number of employment gains created to the economy and the present unemployment rate. The most recent employment data was released in the beginning of last month, prior to the shutdown, and provided a somewhat gloomy snapshot of the jobs market in August.
The figure of positions added to the market in the summer month was down by over 100k since the earlier season, and unemployment crept up to 4.3% – the highest since three years ago.
Alternative Reports Indicate Ongoing Slowdown
Though BLS was set to publish September’s job market report in the start of last month, it halted its release once the shutdown began. Employment data company a leading payroll processor reported earlier this month that the business segment eliminated 32,000 jobs in September, a sign that the employment landscape is still decelerating.
“Both the supply and demand for workers has fallen significantly,” Fed chair the Fed chairman said earlier this month, which he had previously said stems from trade and immigration measures.
Price Data Shows Moderate Rise
Though the bureau’s employment data has been suspended, the bureau still issued its price statistics for September that indicated that costs are rising, albeit gradually. Costs increased 3% over the past twelve months, the highest 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.
