Fed Beige Book "Inflation Easing...Growth Slowing in Some Regions"

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] The U.S. central bank, the Federal Reserve (Fed), indicated that it may ease the pace of interest rate hikes as early as December, while it was confirmed that inflation has eased in some regions alongside a slowdown in economic growth. Due to the impact of high inflation and high interest rates, corporate economic pessimism has also increased.

On the 30th (local time), the Fed released its economic trend report, the "Beige Book," stating that "recent economic activity in the U.S. has been steady or slightly expanded compared to the previous report." This assessment covers the economic conditions in the jurisdictions of 12 Federal Reserve Banks from mid-October to November 23. This report, the last Beige Book of the year, will serve as a basis for the Federal Open Market Committee (FOMC) regular meeting scheduled for December 13-14.

According to the Beige Book, economic activity in the U.S. showed stability or slight expansion, which is far below the moderate growth confirmed in the previous Beige Book. Five regions recorded slight or moderate growth, but the remaining seven regions showed no change or a slight decline. The Beige Book noted that "interest rates and inflation continue to burden economic activity," and "many expressed greater anxiety and pessimism."

Inflation continued to rise at a moderate or strong pace in most regions. However, due to improvements in supply chains and weakening demand, the overall rate of increase has slowed. Prices of some commodities such as lumber and steel showed a downward trend. The rate of increase in housing rents also began to moderate in some areas, and housing prices either slowed their rise or declined. Nonetheless, the high inflation trend is expected to continue for the time being.

The labor market showed moderate growth in most regions. However, reports from two regions indicated a weakening in personnel and demand. Layoffs were also confirmed, mainly in technology, finance, and real estate sectors. Signs of labor market cooling due to consecutive high-intensity tightening are emerging. However, labor shortages persist. The Beige Book conveyed that "some companies hesitated to lay off workers despite reduced labor demand because hiring remains difficult." In some regions, wage pressure was somewhat alleviated.

Concerns about an economic recession among companies have increased. The Fed also acknowledged that efforts to reduce high inflation could lead to a recession. High interest rates increase borrowing costs for consumers and businesses, which is expected to slow the economy.

To curb inflation, the Fed has recently implemented four consecutive giant steps (0.75 percentage point increases in the benchmark interest rate) and suggested that it may ease the pace of rate hikes as early as December. Chairman Powell stated at the Brookings Institution in Washington, DC, in the afternoon, "The timing to slow the pace of rate hikes could be as early as the December meeting." He explained, "The Fed raised rates quickly, and it takes time for these moves to affect the economy," adding, "It would be reasonable to slow the pace of rate hikes."

Accordingly, the market is considering the possibility of a big step (0.5 percentage point increase) in December. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) rate futures market currently reflects more than a 72% chance of a 0.5 percentage point rate hike in December, up from about 66% the previous day.

This content was produced with the assistance of AI translation services.