The US monetary authority lowered borrowing costs on midweek, marking the second rate cut in the current year during financial volatility originating from the government closure and tariff policies.
Move Arrives at Unprecedented Time for Central Bank
The move to cut the benchmark interest rate by a quarter point to a span of 3.75% to 4% arrives at an extraordinary moment for the Fed. The institution has been under immense pressure to lower borrowing costs even with ongoing price increases.
Central Bank Announcement Highlights Labor Market Shifts
In a announcement, the Fed said that the unemployment rate had increased but remains low. “Employment growth have decelerated,” the statement notes. “Inflation has moved up and stays moderately high.”
Government Shutdown Hinders Fed’s Job
The continuing government stoppage, now one of the longest in American history, has also complicated the Fed’s job. Collection of important financial statistics has been indefinitely halted as employees at the Bureau of Labor Statistics are furloughed during the closure.
Information Shortage Affects Policy Decisions
The Fed usually studies labor statistics to determine employment trends, such as the number of new jobs created to the market and the current jobless percentage. The last jobs report was released in the beginning of last month, before the closure, and gave a relatively bleak snapshot of the employment scene in the previous month.
The number of positions added to the market in the summer month was down by over 100k since the spring, and joblessness rose to four point three percent – the highest since three years ago.
Alternative Reports Indicate Ongoing Slowdown
Though the bureau was scheduled to release September’s employment data in the start of last month, it suspended its release once the closure started. Employment data company a leading payroll processor reported recently that the private sector eliminated 32,000 positions in last month, a indication 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 earlier this month, a trend he had previously said stems from trade and immigration measures.
Inflation Report Reveals Gradual Increase
Though BLS’s employment data has been paused, the bureau still released its inflation report for last month that showed that prices are going up, although slowly. Prices rose three percent over the past twelve months, the highest since the start of the year. In spring, the annual inflation rate was two point three percent, the lowest it has been since three years ago. The Fed’s target inflation rate is 2%.
