The US central bank cut interest rates on midweek, marking the second rate cut in the current year amid economic turbulence originating from the government closure and trade duties.
Move Comes at Unprecedented Time for Federal Reserve
The move to cut the key rate by a quarter point to a span of 3.75% to 4% comes at an extraordinary moment for the central bank. The institution has been under immense pressure to cut rates despite ongoing price increases.
Fed Statement Notes Labor Market Shifts
In a statement, the Fed stated that the jobless rate had increased but stays modest. “Job gains have slowed,” the statement reads. “Price increases has moved up and stays somewhat elevated.”
Government Shutdown Complicates Fed’s Job
The ongoing government stoppage, now among the lengthiest in US history, has also hindered the Fed’s job. Collection of key financial statistics has been indefinitely halted as staff at the BLS are furloughed during the shutdown.
Data Gap Affects Monetary Moves
The Fed usually analyzes labor statistics to determine employment trends, including the number of new jobs added to the economy and the current unemployment rate. The last jobs report was published 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 economy in the summer month was down by over 100k since the earlier season, and joblessness rose to 4.3% – the peak since three years ago.
Private Data Show Ongoing Slowdown
Though BLS was set to release last month’s job market report in early October, it suspended its publication once the shutdown started. Employment data company a leading payroll processor indicated earlier this month that the business segment cut 32,000 positions in September, a sign that the employment landscape is still decelerating.
“Supply as well as demand for workers has fallen significantly,” central bank head the Fed chairman said earlier this month, which he had earlier said stems from immigration and tariff policies.
Inflation Report Reveals Moderate Increase
Though the bureau’s jobs report has been paused, the bureau still issued its inflation report for last month that showed that prices are rising, although gradually. Costs rose 3% over the last year, the highest since the start of the year. In spring, the yearly price increase was two point three percent, the minimum it has been since three years ago. The central bank’s goal price increase is two percent.
