The US monetary authority lowered interest rates on midweek, representing the second rate cut in the current year during financial volatility stemming from the government closure and trade duties.
Move Comes at Unprecedented Moment for Federal Reserve
The move to reduce the key rate by a quarter point to a span of 3.75% to 4% comes at an unprecedented moment for the Fed. The institution has been under significant strain to cut rates despite persistent inflation.
Fed Statement Highlights Labor Market Changes
In a statement, the Federal Reserve said that the jobless rate had gone up but remains low. “Job gains have slowed,” the statement notes. “Inflation has risen and stays moderately high.”
Government Shutdown Hinders Central Bank’s Task
The ongoing federal government shutdown, now one of the longest in US 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 furloughed during the shutdown.
Information Shortage Affects Monetary Moves
The Federal Reserve typically analyzes labor statistics to assess labor market conditions, including the number of new jobs created to the economy and the current unemployment rate. The last jobs report was published in the beginning of last month, prior to the shutdown, and provided a somewhat gloomy snapshot of the jobs market in the previous month.
The figure of jobs added to the market in August was lower by more than 100,000 since the spring, and unemployment rose to 4.3% – the peak since three years ago.
Alternative Reports Show Ongoing Decline
Though the bureau was set to publish September’s job market report in the start of last month, it halted its publication once the closure began. Private payroll firm a leading payroll processor reported earlier this month that the business segment cut 32,000 positions in last month, a indication that the job market is continuing to slow.
“Supply as well as demand for workers has fallen quite sharply,” central bank head Jerome Powell said earlier this month, which he had previously said stems from immigration and tariff policies.
Price Data Shows Gradual Rise
Though BLS’s employment data has been suspended, the bureau still issued its price statistics for September that indicated that prices are rising, albeit slowly. Costs rose 3% over the past twelve months, the highest since January. In spring, the yearly price increase was 2.3%, the minimum it has been since three years ago. The central bank’s goal inflation rate is 2%.
