The US central bank lowered borrowing costs on midweek, representing the second rate cut this year during financial volatility originating from the federal government shutdown and tariff policies.
Move Comes at Extraordinary Moment for Federal Reserve
The move to reduce the key rate by a 0.25% to a range of 3.75% to 4% comes at an extraordinary moment for the Fed. The institution has been under immense pressure to cut rates despite persistent inflation.
Central Bank Announcement Notes Job Market Shifts
In a announcement, the Fed said that the jobless rate had gone up but stays modest. “Employment growth have slowed,” the release reads. “Inflation has risen and remains moderately high.”
Government Shutdown Complicates Central Bank’s Task
The ongoing federal government shutdown, now among the lengthiest in US history, has also hindered the Fed’s job. Gathering of key financial statistics has been indefinitely halted as employees at the BLS are on leave during the shutdown.
Data Gap Affects Policy Decisions
The Fed typically analyzes labor statistics to assess labor market conditions, such as the count 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, prior to the shutdown, and gave a relatively bleak overview of the jobs market in the previous month.
The number of positions added to the market in August was lower by more than 100,000 since the spring, and joblessness rose to 4.3% – the highest since three years ago.
Private Data Show Ongoing Slowdown
Though BLS was set to publish September’s employment data in the start of last month, it halted its publication once the closure began. Employment data company ADP indicated earlier this month that the private sector cut 32,000 positions in September, a sign that the job market is still decelerating.
“Both the supply and demand for workers has fallen significantly,” Fed chair the Fed chairman stated earlier this month, which he had earlier said stems from trade and immigration measures.
Price Data Shows Gradual Increase
Though the bureau’s jobs report has been suspended, the agency still released its inflation report for September that indicated that prices are rising, although gradually. Costs increased three percent over the last year, the peak since January. In spring, the annual inflation rate was two point three percent, the minimum it has been since three years ago. The Fed’s target inflation rate is two percent.
