Federal Reserve Reduces Borrowing Costs for Second Instance This Calendar Year Amid Economic Uncertainty
The US monetary authority lowered borrowing costs on midweek, marking the second reduction this year amid economic turbulence originating from the government closure and trade duties.
Move Arrives at Extraordinary Time for Central Bank
The decision to cut the key rate by a quarter point to a span of 3.75% to 4% comes at an unprecedented juncture for the central bank. The institution has been under significant strain to cut rates despite persistent inflation.
Fed Statement Highlights Labor Market Changes
In a statement, the Federal Reserve said that the unemployment rate had gone up but remains low. “Job gains have decelerated,” the release reads. “Price increases has risen and remains somewhat elevated.”
Federal Closure Complicates Central Bank’s Task
The ongoing federal government shutdown, now one of the longest in American history, has also complicated the central bank’s task. Collection of key financial statistics has been indefinitely halted as employees at the Bureau of Labor Statistics are on leave during the closure.
Information Shortage Affects Policy Decisions
The Fed typically analyzes labor statistics to assess employment trends, such as the number of employment gains added to the economy and the current jobless percentage. The last jobs report was published in early September, prior to the shutdown, and provided a relatively bleak snapshot of the jobs market in the previous month.
The number of jobs added to the market in August was lower by more than 100,000 since the spring, and unemployment rose to 4.3% – the peak since three years ago.
Private Data Indicate Ongoing Slowdown
Though the bureau was set to release last month’s job market report in the start of last month, it halted its publication when the shutdown began. Employment data company ADP reported recently that the private sector cut 32,000 jobs in last month, a indication that the job market is still decelerating.
“Both the supply and demand for workers has declined significantly,” central bank head the Fed chairman said recently, a trend he had earlier said comes from trade and immigration measures.
Inflation Report Reveals Gradual Increase
Though BLS’s employment data has been paused, the bureau still issued its inflation report for last month that showed that costs are rising, albeit slowly. Prices rose three percent over the past twelve months, the peak since January. In spring, the yearly price increase was two point three percent, the lowest it has been since three years ago. The central bank’s goal price increase is two percent.
