FX.co ★ U.S. Economy Grows Slightly, Prices Increase Modestly, Says Fed's Beige Book

The Federal Reserve published a report indicating a modest expansion in overall U.S. economic activity since late February. The Fed's Beige Book, constituting anecdotal evidence on economic conditions from twelve Federal districts, reflects that ten out of twelve districts observed either slight or an overall modest economic growth. No changes in activity were reported by the remaining two districts. These figures represent an improvement from the previous report wherein only eight districts recorded such growth.

Additionally, the report shared insights on consumer behavior, inflation, and labor market trends. Despite recent positive retail sales data, consumer spending saw a minimal increase, with variances across different districts and spending categories. Factors such as weakened discretionary spending and heightened price sensitivity among consumers were underscored.

Examining inflation trends, the Beige Book suggested that price increases were moderate and consistent with the pace of the previous report. Disruptions in the Red Sea and the collapse of Baltimore's Key Bridge haven't led to broad price surges. Instead, modest increases in energy prices and significant hikes in insurance rates were observed in several districts. Firms' reduced ability to transfer cost increases to consumers, resulting in smaller profit margins, was another significant finding.

On the labor front, the report showed low to moderate employment increases in nine districts while the remaining three reported stagnant employment numbers. Wage growth was moderate in eight districts while the remaining four cited slight to modest wage hikes.

The release of the Beige Book typically highly anticipates the Fed's next monetary policy meeting, which is slated for April 30-May 1. Based on the CME Group's FedWatch Tool, there's a 99.5% chance that the Fed will maintain the current interest rates during this meeting.