The United States monetary authority lowered interest rates on Wednesday, marking the second reduction this year during economic turbulence originating from the government closure and trade duties.
Decision Comes at Unprecedented Time for Central Bank
The decision to cut the key rate by a quarter point to a range of 4% to 3.75% comes at an unprecedented moment for the Fed. The institution has been under immense pressure to lower borrowing costs despite persistent inflation.
Fed Statement Highlights Job Market Shifts
In a statement, the Federal Reserve said that the jobless rate had increased but remains low. “Employment growth have slowed,” the statement notes. “Inflation has moved up and stays somewhat elevated.”
Government Shutdown Hinders Central Bank’s Task
The ongoing government stoppage, now one of the longest in US history, has also complicated the Fed’s job. Collection of important economic data has been indefinitely halted as employees at the Bureau of Labor Statistics are on leave during the shutdown.
Data Gap Affects Policy Decisions
The Fed usually analyzes BLS data to determine employment trends, such as the number of employment gains created to the economy and the current unemployment rate. The last jobs report was published in the beginning of last month, before the shutdown, and gave a somewhat gloomy snapshot of the jobs market in August.
The number of jobs added to the economy in the summer month was lower by more than 100,000 since the spring, and unemployment crept up to four point three percent – the highest since three years ago.
Alternative Reports Show Ongoing Slowdown
Though the bureau was set to release September’s employment data in early October, it halted its publication once the shutdown started. Employment data company ADP reported recently that the private sector eliminated thirty-two thousand jobs in September, a sign that the employment landscape is continuing to slow.
“Both the supply and demand for labor has fallen significantly,” Fed chair Jerome Powell said recently, a trend he had previously attributed stems from trade and immigration measures.
Inflation Report Shows Gradual Rise
Though BLS’s employment data has been paused, the agency still issued its inflation report for last month that indicated that costs are going up, albeit gradually. Prices increased three percent over the last year, the peak since January. In April, the annual inflation rate was 2.3%, the lowest it has been since three years ago. The central bank’s goal price increase is two percent.
