The US monetary authority lowered interest rates on midweek, representing the second rate cut this year during economic turbulence originating from the government closure and tariff policies.
Decision Comes at Extraordinary Time for Central Bank
The move to cut the key rate by a quarter point to a range of 3.75% to 4% comes at an unprecedented moment for the central bank. The authority has been under immense pressure to lower borrowing costs despite ongoing price increases.
Fed Statement Highlights Job Market Shifts
In a statement, the Fed stated that the jobless rate had increased but remains low. “Job gains have decelerated,” the statement reads. “Price increases has risen and stays somewhat elevated.”
Federal Closure Complicates Fed’s Job
The continuing government stoppage, now one of the longest in US history, has also hindered the central bank’s task. Gathering of important financial statistics has been indefinitely halted as staff at the Bureau of Labor Statistics are on leave during the closure.
Data Gap Impacts Policy Decisions
The Federal Reserve usually analyzes BLS data to determine labor market conditions, such as the count of new jobs added to the market and the current jobless percentage. The most recent employment data was published in early September, before the shutdown, and provided a relatively bleak overview of the employment scene in the previous month.
The number of jobs added to the economy in the summer month was lower by over 100k since the spring, and unemployment rose to 4.3% – the peak since 2021.
Alternative Reports Indicate Continued Slowdown
Though the bureau was set to publish last month’s job market report in early October, it suspended its publication when the closure started. Employment data company ADP indicated recently that the private sector cut 32,000 jobs in September, a sign that the job market is still decelerating.
“Both the supply and demand for workers has declined significantly,” central bank head Jerome Powell stated earlier this month, which he had earlier attributed comes from immigration and tariff policies.
Inflation Report Shows Moderate Rise
Though the bureau’s jobs report has been suspended, the agency still released its inflation report for September that indicated that prices are rising, although gradually. Costs increased three percent over the past twelve months, the highest since January. In April, the yearly price increase was two point three percent, the lowest it has been since three years ago. The Fed’s target inflation rate is two percent.
