Fed Beige Book: Moderate U.S. Inflation and Growth, Economic Outlook Pessimistic; Fed Officials Signal Q4 Rate Cut

To curb persistently high inflation, the Federal Reserve (Fed) decided in early May to maintain the federal funds rate at 5.25% to 5.5%, continuing a streak of six rate freezes. However, the prolonged high interest rate policy has not only pressured financial institutions with the risk of bankruptcy but also indirectly altered consumers' spending habits.

U.S. Economic Activity Continues to Expand, Outlook More Pessimistic Against this backdrop, the Federal Reserve released the Beige Book yesterday (29th), noting that economic activity from early April to mid-May continued to expand in the United States, with most regions experiencing "slight to moderate" growth.

Source: federalreserve.gov

However, this economic expansion has led to rising prices and indirectly forced consumers to change their spending habits:

Retail spending remained flat or slightly increased, reflecting reduced discretionary spending and heightened price sensitivity among consumers.

Additionally, the Beige Book offered a pessimistic summary of overall U.S. economic activity:

The overall outlook has become more pessimistic, as the report indicates increased uncertainty and greater downside risks.

The Beige Book is an annual report released by the Federal Reserve that assesses the economic conditions of the United States. It is published eight times a year and is released before the Federal Open Market Committee meetings. The Beige Book includes summaries of regional economic conditions from the 12 Federal Reserve districts as well as the national economic situation.

Fed Officials: Q4 May Be the Time for a Rate Cut Meanwhile, Raphael Bostic, President of the Federal Reserve Bank of Atlanta, stated at a meeting in Atlanta yesterday that the market still has a long way to go to curb the significant price increases of recent years.

However, despite the current high level of market inflation, Bostic believes that indicators primarily showing a slowdown in inflation may prompt the Fed to consider a rate cut in the fourth quarter of this year.

"My view is that if developments follow the direction I anticipate — a slowdown in inflation, a cooling labor market, and the economy transitioning into a slower but stable growth mode — then I expect the fourth quarter of this year to be when we may genuinely consider and prepare for a rate cut."