The US central bank lowered interest rates on Wednesday, marking the second reduction this year amid economic turbulence stemming from the government closure and trade duties.
Move Comes at Unprecedented Moment for Central Bank
The move to cut the benchmark interest rate by a quarter point to a span of 4% to 3.75% comes at an extraordinary moment for the Fed. The institution has been under immense pressure to cut rates despite ongoing price increases.
Fed Statement Notes Labor Market Changes
In a statement, the Federal Reserve said that the jobless rate had increased but stays modest. “Job gains have slowed,” the statement notes. “Price increases has moved up and remains moderately high.”
Government Shutdown Hinders Fed’s Job
The continuing federal government shutdown, now among the lengthiest in American history, has also hindered the central bank’s task. Collection of key economic data has been suspended without a timeline as employees at the BLS are on leave during the closure.
Data Gap Impacts Policy Decisions
The Federal Reserve typically studies BLS data to assess labor market conditions, including the number of employment gains added to the market and the current unemployment rate. The most recent employment data was released in the beginning of last month, before the closure, and gave a somewhat gloomy snapshot of the employment scene in the previous month.
The number of positions created to the market in the summer month was lower by more than 100,000 since the earlier season, and joblessness rose to 4.3% – the highest since three years ago.
Alternative Reports Indicate Continued Slowdown
Though BLS was set to release September’s job market report in early October, it suspended its release once the closure started. Employment data company a leading payroll processor reported recently that the private sector eliminated thirty-two thousand positions in September, a sign that the employment landscape is still decelerating.
“Both the supply and demand for workers has declined quite sharply,” central bank head the Fed chairman stated recently, a trend he had previously said comes from trade and immigration measures.
Price Data Reveals Gradual Rise
Though BLS’s employment data has been suspended, the agency still issued its price statistics for last month that indicated that prices are going up, albeit slowly. Prices rose 3% over the past twelve months, the highest since January. In April, the yearly price increase was two point three percent, the minimum it has been since three years ago. The Fed’s target inflation rate is 2%.
