The United States central bank reduced interest rates on midweek, marking the second rate cut in the current year during financial volatility stemming from the federal government shutdown and trade duties.
Move Arrives at Extraordinary Moment for Federal Reserve
The move to cut the key rate by a 0.25% to a span of 3.75% to 4% comes at an extraordinary juncture for the central bank. The authority has been under immense pressure to cut rates despite ongoing price increases.
Central Bank Announcement Highlights Job Market Changes
In a statement, the Federal Reserve stated that the unemployment rate had gone up but remains low. “Employment growth have decelerated,” the statement notes. “Inflation has risen and remains moderately high.”
Federal Closure Hinders Fed’s Job
The ongoing federal government shutdown, now one of the longest in US history, has also hindered the central bank’s task. Gathering of important economic data has been indefinitely halted as staff at the BLS are furloughed during the shutdown.
Information Shortage Impacts Policy Decisions
The Fed typically studies labor statistics to determine labor market conditions, such as the count of new jobs added to the economy and the current unemployment rate. The most recent employment data was released in early September, prior to the closure, and provided a relatively bleak snapshot of the jobs market in August.
The number of positions added to the market in the summer month was lower by over 100k since the spring, and joblessness crept up to four point three percent – the highest since three years ago.
Private Data Show Ongoing Slowdown
Though BLS was scheduled to release September’s job market report in early October, it halted its publication once the closure began. Employment data company a leading payroll processor reported recently that the private sector cut 32,000 positions in last month, a indication that the employment landscape is still decelerating.
“Supply as well as demand for labor has declined significantly,” central bank head the Fed chairman stated recently, which he had earlier attributed stems from trade and immigration measures.
Inflation Report Shows Moderate Increase
Though BLS’s jobs report has been paused, the bureau still released its inflation report for September that indicated that costs are rising, although gradually. Prices increased three percent over the past twelve months, the peak since January. In April, the annual inflation rate was 2.3%, the lowest it has been since three years ago. The Fed’s target price increase is 2%.
