The US monetary authority cut interest rates on midweek, marking the second reduction this year amid financial volatility originating from the federal government shutdown and trade duties.
Decision Comes at Unprecedented Moment for Central Bank
The move to reduce the benchmark interest rate by a quarter point to a range of 4% to 3.75% comes at an extraordinary juncture for the Fed. The institution has been under immense pressure to cut rates despite ongoing price increases.
Central Bank Announcement Highlights Job Market Changes
In a statement, the Fed stated that the jobless rate had increased but remains low. “Employment growth have decelerated,” the statement notes. “Price increases has risen 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. Gathering of key economic data has been indefinitely halted as employees at the BLS are furloughed during the shutdown.
Data Gap Impacts Policy Decisions
The Federal Reserve typically analyzes BLS data to determine employment trends, such as the count of employment gains created to the economy and the present unemployment rate. The last jobs report was released in early September, prior to the closure, and gave a somewhat gloomy overview of the employment scene in the previous month.
The figure of jobs added to the market in the summer month was lower by more than 100,000 since the spring, and unemployment rose to four point three percent – the highest since three years ago.
Alternative Reports 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 reported recently that the private sector eliminated thirty-two thousand jobs in September, a sign that the job market is continuing to slow.
“Supply as well as demand for workers has fallen significantly,” Fed chair the Fed chairman stated earlier this month, which he had previously said comes from trade and immigration measures.
Inflation Report Shows Moderate Rise
Though BLS’s employment data has been suspended, the bureau still issued its price statistics for September that indicated that prices are going up, albeit slowly. Prices rose three percent over the last year, the highest since January. In April, the yearly price increase was 2.3%, the lowest it has been since three years ago. The central bank’s goal price increase is two percent.
