Federal Reserve Reduces Borrowing Costs for Second Time This Calendar Year During Economic Uncertainty

The US central bank cut borrowing costs on Wednesday, representing the second rate cut this year during financial volatility originating from the government closure and trade duties.

Move Arrives at Extraordinary Time for Central Bank

The move to reduce the key rate by a 0.25% to a range of 4% to 3.75% arrives at an extraordinary juncture for the Fed. The institution has been under significant strain to lower borrowing costs despite ongoing price increases.

Fed Statement Notes Job Market Shifts

In a announcement, the Fed said that the unemployment rate had increased but remains low. “Employment growth have decelerated,” the statement reads. “Price increases has risen and stays moderately high.”

Federal Closure Hinders Central Bank’s Task

The continuing government stoppage, now one of the longest in American history, has also complicated the Fed’s job. Gathering of key financial statistics has been indefinitely halted as staff at the Bureau of Labor Statistics are on leave during the closure.

Data Gap Affects Policy Decisions

The Federal Reserve usually studies labor statistics to assess employment trends, such as the count of new jobs added to the economy and the present unemployment rate. The most recent employment data was published in the beginning of last month, prior to the shutdown, and provided a relatively bleak snapshot of the employment scene in the previous month.

The number of positions added to the economy in the summer month was lower by over 100k since the spring, and joblessness rose to four point three percent – the peak since three years ago.

Alternative Reports Indicate Ongoing Slowdown

Though BLS was scheduled to release last month’s employment data in early October, it halted its release when the closure started. Private payroll firm ADP reported recently that the business segment cut 32,000 jobs in last month, a sign that the employment landscape is still decelerating.

“Supply as well as demand for labor has declined quite sharply,” Fed chair Jerome Powell said recently, a trend he had previously said comes from trade and immigration measures.

Inflation Report Shows Gradual Increase

Though the bureau’s jobs report has been suspended, the agency still released its price statistics for last month that showed that costs are rising, albeit slowly. Prices rose three percent over the last year, the peak since January. In April, the annual inflation rate was 2.3%, the lowest it has been since three years ago. The Fed’s target price increase is 2%.