The US central bank cut borrowing costs on midweek, representing the second rate cut this year amid economic turbulence stemming from the federal government shutdown and trade duties.
Move Comes at Extraordinary 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 central bank. The institution has been under immense pressure to lower borrowing costs despite ongoing price increases.
Central Bank Announcement Notes Job Market Shifts
In a statement, the Fed said that the jobless rate had gone up but remains low. “Job gains have slowed,” the release reads. “Inflation has moved up and stays somewhat elevated.”
Government Shutdown Complicates Central Bank’s Task
The ongoing government stoppage, now one of the longest in American history, has also complicated the central bank’s task. Collection of important economic data has been suspended without a timeline as staff at the BLS are furloughed during the closure.
Information Shortage Affects Policy Decisions
The Federal Reserve typically analyzes BLS data to assess employment trends, including the number of employment gains added to the market and the current jobless percentage. The most recent employment data was published in early September, prior to the closure, and gave a relatively bleak snapshot of the employment scene in August.
The number of jobs added to the market in August was lower by more than 100,000 since the spring, and joblessness crept up to four point three percent – the highest since three years ago.
Private Data Show Ongoing Decline
Though the bureau was scheduled to release September’s employment data in early October, it halted its publication when the shutdown began. Private payroll firm ADP reported recently that the business segment cut thirty-two thousand jobs in September, a indication that the job market is continuing to slow.
“Both the supply and demand for labor has declined quite sharply,” central bank head Jerome Powell said recently, a trend he had earlier said comes from trade and immigration measures.
Price Data Reveals Moderate Rise
Though BLS’s jobs report has been suspended, the agency still issued its price statistics for last month that showed that costs are going up, although gradually. Costs rose 3% over the past twelve months, the peak since the start of the year. 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.
