Federal Reserve Lowers Borrowing Costs for Second Time This Year During Financial Instability
The US monetary authority lowered interest rates on midweek, marking the second rate cut this year amid financial volatility stemming from the federal government shutdown and trade duties.
Move Comes at Unprecedented Moment for Federal Reserve
The move to cut the benchmark interest rate by a 0.25% to a range of 4% to 3.75% comes at an unprecedented juncture for the Fed. The institution has been under significant strain to lower borrowing costs despite ongoing price increases.
Fed Statement Highlights Labor Market Changes
In a statement, the Federal Reserve stated that the jobless rate had gone up but remains low. “Job gains have decelerated,” the release reads. “Inflation has moved up and remains somewhat elevated.”
Federal Closure Hinders Fed’s Job
The ongoing federal government shutdown, now among the lengthiest in US history, has also hindered the central bank’s task. Gathering of important economic data has been suspended without a timeline as staff at the Bureau of Labor Statistics are on leave during the shutdown.
Data Gap Impacts Policy Decisions
The Fed usually studies BLS data to assess labor market conditions, such as the number of employment gains created to the economy and the present jobless percentage. The last jobs report was published in early September, before the closure, and provided a relatively bleak overview of the jobs market in the previous month.
The figure of positions created to the market in the summer month was lower by over 100k since the earlier season, and unemployment crept up to four point three percent – the peak since three years ago.
Alternative Reports Indicate Continued Slowdown
Though the bureau was scheduled to publish September’s employment data in the start of last month, it halted its publication when the shutdown started. Employment data company a leading payroll processor reported recently that the private sector cut thirty-two thousand jobs in September, a indication that the employment landscape is still decelerating.
“Both the supply and demand for labor has declined significantly,” central bank head the Fed chairman said earlier this month, a trend he had earlier attributed comes from trade and immigration measures.
Inflation Report Shows Gradual Rise
Though the bureau’s employment data has been suspended, the bureau still issued its inflation report for last month that indicated that prices are rising, albeit gradually. Prices increased 3% over the past twelve months, the peak since January. In spring, the yearly price increase was 2.3%, the minimum it has been since three years ago. The Fed’s target inflation rate is two percent.