Fed Lowers Interest Rates for Second Instance This Calendar Year During Financial Instability
The US central bank cut interest rates on Wednesday, representing the second reduction this year during financial volatility stemming from the federal government shutdown and trade duties.
Decision Arrives at Unprecedented Time for Federal Reserve
The decision to cut the key rate by a 0.25% to a range of 4% to 3.75% comes at an extraordinary juncture for the central bank. The authority has been under significant strain to cut rates even with ongoing price increases.
Central Bank Announcement Highlights Job Market Changes
In a announcement, the Fed said that the unemployment rate had gone up but stays modest. “Job gains have decelerated,” the release reads. “Inflation has moved up and remains somewhat elevated.”
Government Shutdown Hinders Central Bank’s Task
The continuing government stoppage, now one of the longest in US history, has also hindered the Fed’s job. Collection of important economic data has been indefinitely halted as employees at the BLS are furloughed during the closure.
Data Gap Impacts Policy Decisions
The Fed typically analyzes BLS data to determine employment trends, including the number of new jobs created to the economy and the current jobless percentage. The most recent employment data was released in early September, before the closure, and provided a relatively bleak overview of the employment scene in the previous month.
The number of jobs added to the economy in August was lower by over 100k since the spring, and unemployment crept up to 4.3% – the highest since three years ago.
Alternative Reports Indicate Ongoing Decline
Though the bureau was set to publish September’s employment data in early October, it suspended its publication when the closure started. Employment data company a leading payroll processor reported earlier this month that the private sector cut 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 quite sharply,” Fed chair Jerome Powell said recently, a trend he had previously attributed comes from trade and immigration measures.
Price Data Reveals Moderate Rise
Though the bureau’s jobs report has been suspended, the bureau still issued its price statistics for last month that showed that prices are going up, although slowly. Prices rose 3% over the past twelve months, the highest since the start of the year. 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.
