The US central bank lowered interest rates on Wednesday, marking the second rate cut in the current year during economic turbulence stemming from the federal government shutdown and trade duties.
Decision Comes at Unprecedented Moment for Central Bank
The decision to reduce the key rate by a 0.25% to a span of 3.75% to 4% comes at an unprecedented moment for the central bank. 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 gone up but stays modest. “Employment growth have decelerated,” the release reads. “Price increases 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 complicated the Fed’s job. Collection of key economic data has been suspended without a timeline as employees at the Bureau of Labor Statistics are furloughed during the closure.
Information Shortage Impacts Policy Decisions
The Federal Reserve typically studies BLS data to determine employment trends, including the count of new jobs added to the economy and the current unemployment rate. The last jobs report was published in the beginning of last month, prior to the shutdown, and gave a relatively bleak snapshot of the jobs market in the previous month.
The figure of positions created to the market in the summer month was down by over 100k since the earlier season, and joblessness rose to four point three percent – the peak since three years ago.
Private Data Show Continued Decline
Though BLS was set to release last month’s employment data in the start of last month, it suspended its release once the shutdown started. Private payroll firm a leading payroll processor indicated recently that the private sector cut 32,000 positions in September, a sign that the employment landscape is still decelerating.
“Both the supply and demand for labor has fallen quite sharply,” Fed chair the Fed chairman stated earlier this month, a trend he had earlier attributed comes from trade and immigration measures.
Inflation Report Reveals Moderate Rise
Though the bureau’s employment data has been suspended, the bureau still issued its price statistics for last month that showed that prices are going up, although gradually. Prices rose 3% over the last year, the highest since January. In spring, 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.
