The US monetary authority cut interest rates on midweek, marking the second rate cut in the current year amid financial volatility originating from the federal government shutdown and tariff policies.
Move Comes at Unprecedented Moment for Central Bank
The move to cut the key rate by a 0.25% to a range of 4% to 3.75% comes at an unprecedented juncture for the central bank. The authority has been under immense pressure to cut rates despite persistent inflation.
Fed Statement Notes Job Market Changes
In a announcement, the Federal Reserve stated that the jobless rate had increased but remains low. “Employment growth have slowed,” the release reads. “Price increases has risen and remains somewhat elevated.”
Federal Closure Complicates Fed’s Job
The continuing government stoppage, now one of the longest in US history, has also hindered the Fed’s job. Gathering of key financial statistics has been indefinitely halted as staff at the BLS are furloughed during the shutdown.
Information Shortage Impacts Policy Decisions
The Fed typically analyzes BLS data to determine employment trends, such as the number of new jobs created to the economy and the current jobless percentage. The last jobs report was published in the beginning of last month, before the shutdown, and provided a somewhat gloomy overview of the employment scene in August.
The number of jobs created to the economy in August was lower by more than 100,000 since the spring, and joblessness crept up to four point three percent – the highest since three years ago.
Alternative Reports Indicate Ongoing Slowdown
Though the bureau was scheduled to release last month’s employment data in the start of last month, it halted its publication once the shutdown started. Employment data company a leading payroll processor indicated recently that the private sector cut 32,000 jobs in September, a indication that the job market is continuing to slow.
“Supply as well as demand for workers has declined quite sharply,” central bank head Jerome Powell stated recently, a trend he had previously said stems from trade and immigration measures.
Inflation Report Shows Moderate Increase
Though the bureau’s employment data has been paused, the agency still issued its inflation report for last month that showed that prices are going up, albeit gradually. Prices increased 3% over the past twelve months, the peak since the start of the year. In spring, the yearly price increase was 2.3%, the lowest it has been since three years ago. The Fed’s target price increase is two percent.
