The US monetary authority cut interest rates on Wednesday, marking the second rate cut this year during financial volatility stemming from the government closure and trade duties.
Decision Arrives at Extraordinary Moment for Federal Reserve
The decision to reduce the key rate by a quarter point to a range of 4% to 3.75% comes at an extraordinary juncture for the Fed. The authority has been under immense pressure to cut rates even with ongoing price increases.
Central Bank Announcement Highlights Labor Market Changes
In a announcement, the Federal Reserve said that the unemployment rate had gone up but remains low. “Employment growth have decelerated,” the statement notes. “Price increases has risen and remains somewhat elevated.”
Federal Closure Complicates Fed’s Job
The ongoing government stoppage, now one of the longest in US history, has also hindered the central bank’s task. Gathering of key economic data has been suspended without a timeline as staff at the Bureau of Labor Statistics are furloughed during the closure.
Data Gap Affects Monetary Moves
The Fed typically analyzes BLS data to determine labor market conditions, such as the count of employment gains created to the market and the present unemployment rate. The most recent employment data was released in the beginning of last month, prior to the closure, and gave a relatively bleak snapshot of the jobs market in August.
The figure of positions created to the economy in the summer month was down by over 100k since the spring, and joblessness crept up to 4.3% – the highest since three years ago.
Private Data Indicate Ongoing Slowdown
Though BLS was set to publish last month’s employment data in early October, it halted its publication when the closure started. Employment data company ADP reported earlier this month that the private sector cut 32,000 jobs in last month, a indication that the job market is continuing to slow.
“Both the supply and demand for labor has fallen quite sharply,” central bank head Jerome Powell said recently, a trend he had previously attributed comes from trade and immigration measures.
Price Data Shows Gradual Rise
Though the bureau’s jobs report has been paused, the bureau still released its inflation report for last month that indicated that prices are rising, although slowly. Prices increased 3% over the past twelve months, the peak since January. In spring, 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.
