Fed Beige Book Signals Mild Growth; Tariff Pressures Delay Rate Cut Expectations

by MarketNewsData

U.S. economic activity increased slightly from late May through early July, with more districts reporting growth than in the previous report. Still, underlying momentum remains soft and businesses remain cautious.

Key Highlights:

  • Regional activity:
    • 5 districts saw modest growth
    • 5 were flat
    • 2 reported declines
      (an improvement from last report’s broader stagnation)
  • Consumer spending: Softened overall; auto sales dipped after earlier strength
  • Manufacturing: Continued edging lower
  • Construction: Slowed in most districts, pressured by high materials and labor costs
  • Employment: Rose slightly; labor availability improved
  • Wages: Grew modestly, slower than earlier in the year
  • Prices: Moderate overall, but tariffs and insurance costs are driving rising input costs — with some districts expecting inflation to pick up later this summer

Business sentiment remains muted:

  • Firms report persistent uncertainty
  • Hiring and investment plans are on hold in many regions
  • Outlook is broadly flat to slightly weaker

📉 Implication for Interest Rates:

  • The Fed is unlikely to cut rates immediately, as tariff-related inflation risks cloud the picture.
  • However, cooling growth and labor markets give the Fed room to adjust policy if inflation stays contained beyond the summer.

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