The US central bank lowered borrowing costs on midweek, representing the second rate cut in the current year amid financial volatility originating from the government closure and trade duties.
Move Comes at Unprecedented Time for Central Bank
The move to cut the key rate by a 0.25% to a span of 4% to 3.75% comes at an unprecedented juncture for the central bank. The authority has been under significant strain to cut rates despite persistent inflation.
Central Bank Announcement Highlights Job Market Changes
In a announcement, the Federal Reserve stated that the jobless rate had increased but remains low. “Employment growth have decelerated,” the statement notes. “Inflation has moved up and remains somewhat elevated.”
Government Shutdown Hinders Fed’s Job
The ongoing government stoppage, now one of the longest in American history, has also hindered the Fed’s job. Collection of important financial statistics has been indefinitely halted as employees at the BLS are on leave during the shutdown.
Data Gap Impacts Monetary Moves
The Fed typically studies labor statistics to assess employment trends, including the count of employment gains created to the economy and the current jobless percentage. The last jobs report was published in early September, prior to the shutdown, and provided a somewhat gloomy overview of the jobs market in August.
The number of jobs created to the market in the summer month was down by over 100k since the earlier season, and unemployment rose to 4.3% – the peak since 2021.
Private Data Show Continued Decline
Though the bureau was set to publish September’s job market report in early October, it halted its release once the shutdown began. Private payroll firm a leading payroll processor reported recently that the private sector cut 32,000 positions in last month, a sign that the employment landscape is continuing to slow.
“Supply as well as demand for workers has fallen significantly,” central bank head Jerome Powell stated recently, which he had earlier said comes from immigration and tariff policies.
Price Data Shows Moderate Rise
Though the bureau’s jobs report has been suspended, the agency still issued its inflation report for last month that showed that costs are going up, although slowly. Prices rose three percent over the last year, the highest since January. In April, the annual inflation rate was two point three percent, the minimum it has been since 2021. The Fed’s target price increase is two percent.
