The US monetary authority lowered borrowing costs on Wednesday, representing the second reduction this year during economic turbulence stemming from the government closure and trade duties.
Move Comes at Extraordinary Moment for Central Bank
The move to reduce the benchmark interest rate by a 0.25% to a range of 3.75% to 4% arrives at an extraordinary moment for the Fed. The institution has been under immense pressure to lower borrowing costs despite persistent inflation.
Central Bank Announcement Highlights Labor Market Shifts
In a statement, the Federal Reserve said that the jobless rate had increased but stays modest. “Employment growth have decelerated,” the statement notes. “Inflation has moved up and stays moderately high.”
Government Shutdown Hinders Fed’s Job
The ongoing government stoppage, now one of the longest in US history, has also complicated the central bank’s task. Gathering of key financial statistics has been indefinitely halted as employees at the Bureau of Labor Statistics are furloughed during the closure.
Information Shortage Affects Monetary Moves
The Fed usually studies BLS data to assess employment trends, including the count of new jobs added to the economy and the current unemployment rate. The most recent employment data was published in early September, before the shutdown, and gave a relatively bleak snapshot of the jobs market in August.
The figure of jobs added to the market in the summer month was lower by more than 100,000 since the earlier season, and unemployment crept up to four point three percent – the highest since three years ago.
Alternative Reports Indicate Ongoing Slowdown
Though BLS was scheduled to release last month’s job market report in early October, it suspended its publication when the shutdown began. Employment data company ADP reported recently that the private sector eliminated 32,000 jobs in last month, a sign that the job market is continuing to slow.
“Supply as well as demand for workers has fallen significantly,” Fed chair Jerome Powell said earlier this month, which he had previously attributed comes from trade and immigration measures.
Inflation Report Shows Moderate Rise
Though the bureau’s jobs report has been suspended, the bureau still released its price statistics for September that showed that costs are rising, although slowly. Prices increased three percent over the past twelve months, the highest 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 price increase is two percent.
