Bloomberg News reports that the Federal Reserve sounded a note of caution related to the US economy. The Us economy was seen expanding modestly through October but with activity slowing down considerably, raising concerns when inflationary pressures seem to ease out a little.
In its Beige Book report, the Fed said that the outlook was found to be pessimistic amidst surging worries related to the demand becoming weak. The report in the Beige Book was published just two weeks before every meeting of the Federal Open Market Committee, which sets the policy. Many districts found a cooling-down effect in demand for labor, while some noted that business entities were hesitating to add the payrolls amidst surging concerns of a downturn in the economy.
The report was based on anecdotal information that the Fed’s 12 regional banks had gathered through October 7th, thereby compiling done by Dallas Fed. There were 13 times that the word “recession” was mentioned compared to 10 times in the Beige Book.
The Fed said that the national economic activity was found expanding modestly on the net because the earlier report, the conditions varied widely across the different industries and districts. There were four districts where flat activity was noted, and two cited declines, with demand being slow or weak, attributing to higher interest rates, supply disruptions, and inflation.
Bloomberg News reports that the aggressive increase of interest rates by the Fed in trying to cool down demand for bringing down consumer inflation recorded an 8% figure above for seven consecutive months straight.
For a fourth consecutive 75 basis point hike in interest rate, the central bank is on track, as seen at the beginning of November as policymakers are trying to combat inflation at an all-time high. Investors have been betting on yet another surge in size likely to happen in December, with the markets seeing the rates approaching 5% in the next year after getting disappointing inflation news.
US core consumer prices stripping out food and energy were found to rise 6.6% in September compared to what it was a year earlier. This is the highest level after 1982, as per the report published on October 13th by the Labor Department. This led to a worrying pattern for the policy following the acceleration of the gauge in August.
The labor market was described as tight, although many districts report an easing out of wage pressures. Chair Jerome Powell and his co-workers have been warning that fighting off inflation might be causing some pain, which also includes a higher unemployment rate. The labor market has been described as tight to the extent of an unhealthy degree, although growth in the job was seen to be moderate in recent times. Nonfarm payrolls increased by 263,000 in September, whereas the unemployment rate declined to 3.5%, which matched a five-decade low. In contrast to the report’s tone, economic growth might have geared up in the 3rd quarter, with the tracker of the gross domestic product of the Fed of Atlanta pointing at an expansion of 3% in the same quarter.
