The United States monetary authority reduced interest rates on midweek, representing the second rate cut this year amid economic turbulence originating from the government closure and trade duties.
Move Comes at Extraordinary Moment for Federal Reserve
The move to cut the benchmark interest rate by a quarter point to a range of 4% to 3.75% comes at an unprecedented moment for the central bank. The institution has been under immense pressure to lower borrowing costs despite persistent inflation.
Central Bank Announcement Highlights Job Market Shifts
In a statement, the Federal Reserve stated that the unemployment rate had gone up but stays modest. “Employment growth have slowed,” the statement notes. “Inflation has moved up and stays moderately high.”
Federal Closure Complicates Central Bank’s Task
The ongoing federal government shutdown, now one of the longest in US history, has also hindered the Fed’s job. Collection of key economic data has been suspended without a timeline as staff at the Bureau of Labor Statistics are furloughed during the shutdown.
Information Shortage Impacts Policy Decisions
The Fed usually analyzes labor statistics to determine labor market conditions, including the count of new jobs created to the economy and the current jobless percentage. The most recent employment data was released in early September, prior to the closure, and provided a somewhat gloomy overview of the jobs market in the previous month.
The figure of positions added to the economy in August was down by over 100k since the spring, and unemployment rose to 4.3% – the highest since three years ago.
Alternative Reports Indicate Continued Slowdown
Though the bureau was set to publish last month’s employment data in early October, it halted its release once the shutdown started. Employment data company ADP indicated recently that the private sector cut thirty-two thousand jobs in last month, a sign that the employment landscape is continuing to slow.
“Both the supply and demand for workers has fallen quite sharply,” Fed chair Jerome Powell stated recently, which he had earlier attributed comes from trade and immigration measures.
Inflation Report Reveals Gradual Rise
Though the bureau’s employment data has been suspended, the bureau still released its price statistics for last month that indicated that prices are going up, albeit gradually. Costs rose 3% over the past twelve months, the highest since the start of the year. In April, the annual inflation rate was two point three percent, the lowest it has been since three years ago. The central bank’s goal price increase is 2%.
