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The US central bank reduced borrowing costs on midweek, representing the second rate cut in the current year amid financial volatility stemming from the federal government shutdown and tariff policies.

Move Comes at Extraordinary Moment for Central Bank

The decision to cut the key rate by a quarter point to a range of 4% to 3.75% arrives at an extraordinary moment for the central bank. The authority has been under significant strain to lower borrowing costs even with ongoing price increases.

Central Bank Announcement Notes Labor Market Changes

In a announcement, the Federal Reserve said that the jobless rate had gone up but stays modest. “Job gains have decelerated,” the release notes. “Inflation has moved up and stays moderately high.”

Government Shutdown Complicates Fed’s Job

The continuing federal government shutdown, now among the lengthiest in US history, has also complicated the Fed’s job. Collection of important economic data has been indefinitely halted as employees at the BLS are furloughed during the closure.

Information Shortage Impacts Monetary Moves

The Federal Reserve typically analyzes BLS data to determine labor market conditions, such as the number of employment gains added to the market and the present unemployment rate. The most recent employment data was released in the beginning of last month, prior to the closure, and provided a somewhat gloomy snapshot of the employment scene in August.

The number of positions added to the market in August was down by over 100k since the spring, and unemployment crept up to 4.3% – the highest since three years ago.

Alternative Reports Indicate Continued Decline

Though the bureau was set to release last month’s employment data in early October, it suspended its publication when the shutdown started. Employment data company ADP indicated earlier this month that the business segment cut 32,000 positions in last month, a indication that the employment landscape is continuing to slow.

“Both the supply and demand for workers has fallen quite sharply,” central bank head the Fed chairman stated earlier this month, which he had previously said comes from trade and immigration measures.

Inflation Report Reveals Gradual Increase

Though BLS’s employment data has been suspended, the agency still released its price statistics for September that indicated that prices are going up, although gradually. Costs increased 3% over the past twelve months, the peak since January. In spring, the yearly price increase was two point three percent, the minimum it has been since three years ago. The Fed’s target price increase is two percent.