The US monetary authority cut interest rates on Wednesday, marking the second rate cut this year amid financial volatility stemming from the federal government shutdown and trade duties.
Decision Comes at Unprecedented Time for Central Bank
The decision to cut the benchmark interest rate by a 0.25% to a range of 4% to 3.75% comes at an extraordinary juncture for the central bank. The authority has been under significant strain to cut rates despite persistent inflation.
Central Bank Announcement Highlights Job Market Changes
In a statement, the Federal Reserve said that the jobless rate had increased but stays modest. “Employment growth have slowed,” the statement reads. “Price increases has risen and stays moderately high.”
Government Shutdown Complicates Central Bank’s Task
The continuing federal government shutdown, now one of the longest in American history, has also complicated the Fed’s job. Gathering of important economic data has been indefinitely halted as staff at the BLS are furloughed during the closure.
Data Gap Affects Monetary Moves
The Federal Reserve usually analyzes BLS data to assess labor market conditions, including the count of employment gains created to the market and the current jobless percentage. The last jobs report was released in the beginning of last month, before the closure, and gave a somewhat gloomy overview of the jobs market in the previous month.
The number of positions created to the economy in the summer month was down by over 100k since the spring, and unemployment rose to 4.3% – the peak since three years ago.
Private Data Indicate Continued Decline
Though the bureau was scheduled to release September’s job market report in early October, it suspended its release once the shutdown began. Employment data company a leading payroll processor reported earlier this month that the business segment eliminated 32,000 jobs in last month, a sign that the job market is continuing to slow.
“Supply as well as demand for labor has fallen quite sharply,” central bank head the Fed chairman said recently, which he had earlier attributed stems from trade and immigration measures.
Inflation Report Shows Gradual Increase
Though the bureau’s employment data has been suspended, the agency still released its price statistics for September that showed that costs are going up, albeit slowly. Prices rose 3% over the last year, the highest since the start of the year. In April, the annual inflation rate was two point three percent, the lowest it has been since three years ago. The central bank’s goal inflation rate is two percent.
