The US central bank lowered borrowing costs on Wednesday, representing the second reduction in the current year amid financial volatility stemming from the federal government shutdown and trade duties.
Move Comes at Unprecedented Time for Federal Reserve
The move to cut the key rate by a quarter point to a range of 4% to 3.75% comes at an unprecedented juncture for the Fed. The authority has been under significant strain to lower borrowing costs despite ongoing price increases.
Central Bank Announcement Highlights Labor Market Changes
In a statement, the Fed said that the jobless rate had gone up but stays modest. “Job gains have slowed,” the statement reads. “Price increases has risen and remains moderately high.”
Federal Closure Hinders Fed’s Job
The ongoing federal government shutdown, now among the lengthiest in American history, has also complicated the central bank’s task. Gathering of important economic data has been suspended without a timeline as staff at the Bureau of Labor Statistics are on leave during the closure.
Information Shortage Impacts Monetary Moves
The Fed usually studies BLS data to determine labor market conditions, including the number of employment gains added to the market and the current jobless percentage. The last jobs report was published in early September, before the closure, and gave a somewhat gloomy overview of the jobs market in August.
The figure of positions created to the market in the summer month was down by more than 100,000 since the spring, and unemployment rose to 4.3% – the highest since three years ago.
Private Data Show Continued Slowdown
Though BLS was set to publish last month’s employment data in early October, it halted its release when the closure began. Employment data company ADP reported earlier this month that the private sector cut 32,000 positions in September, a sign that the job market is continuing to slow.
“Both the supply and demand for labor has fallen quite sharply,” Fed chair the Fed chairman said earlier this month, which he had previously said stems from trade and immigration measures.
Price Data Shows Moderate Rise
Though BLS’s employment data has been paused, the agency still issued its inflation report for last month that indicated that costs are rising, albeit slowly. Costs increased three percent over the past twelve months, the highest since January. In spring, 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%.
