The US monetary authority cut borrowing costs on Wednesday, marking the second rate cut this year amid economic turbulence originating from the federal government shutdown and tariff policies.
Move Comes at Extraordinary Moment for Federal Reserve
The move to cut the key rate by a quarter point to a span of 4% to 3.75% comes at an unprecedented juncture for the Fed. The authority has been under significant strain to cut rates despite persistent inflation.
Central Bank Announcement Notes Labor Market Changes
In a statement, the Federal Reserve stated that the jobless rate had gone up but remains low. “Employment growth have slowed,” the release reads. “Price increases has risen and stays somewhat elevated.”
Federal Closure Complicates Fed’s Job
The continuing federal government shutdown, now one of the longest in US history, has also complicated the Fed’s job. Collection of key financial statistics has been suspended without a timeline as staff at the Bureau of Labor Statistics are on leave during the closure.
Data Gap Affects Policy Decisions
The Fed usually analyzes BLS data to assess labor market conditions, including the count of employment gains 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 overview of the employment scene in August.
The figure of jobs created to the market in the summer month was lower by over 100k since the earlier season, and joblessness rose to 4.3% – the highest since three years ago.
Alternative Reports Indicate Ongoing Decline
Though BLS was scheduled to publish last month’s job market report in early October, it suspended its release when the closure began. Employment data company a leading payroll processor indicated earlier this month that the private sector eliminated 32,000 jobs in September, a sign that the job market is still decelerating.
“Supply as well as demand for workers has declined significantly,” Fed chair the Fed chairman said earlier this month, a trend he had previously said comes from trade and immigration measures.
Price Data Reveals Gradual Rise
Though BLS’s jobs report has been paused, the agency still issued its inflation report for last month that showed that costs are going up, although slowly. Prices rose 3% over the last year, the highest since January. In spring, the yearly price increase was 2.3%, the minimum it has been since three years ago. The central bank’s goal price increase is 2%.
