AhlulBayt News Agency: The latest Beige Book report from the US Federal Reserve reveals a decline in economic activity, with rising tariffs contributing to increased costs and inflationary pressures.
The report, based on surveys and observations from the Fed’s 12 regional banks through May 23, describes the economic outlook as “slightly pessimistic and uncertain,” unchanged from the previous assessment.
It notes widespread concerns among businesses that costs and prices will rise at a faster pace in the coming months.
The Fed has maintained its policy rate between 4.25%-4.50% since December and is expected to keep it steady for the next few months while assessing the impact of President Donald Trump’s trade policies on inflation and employment.
While official government reports have yet to reflect significant changes, Fed officials are relying on real-time data, including business and household experiences captured in the Beige Book, which indicate uneven but widespread effects of Trump’s tariffs.
In January, all 12 Fed districts reported economic growth; however, the latest report shows that only three districts experienced growth, while half reported economic declines. Employment across most districts remained flat.
The Personal Consumption Expenditures (PCE) Price Index rose 2.1% in April, marking the lowest inflation reading in four years but still slightly above the Fed’s 2% target.
Economists predict that upcoming data will show US employers added 130,000 jobs in May, down from 177,000 in April, but still above the 100,000 threshold considered necessary for a stable labor market.
Analysts anticipate further deterioration in both inflation and employment figures, with the Beige Book already suggesting signs of economic weakening.
Additional survey-based data supports this trend, including an Institute for Supply Management (ISM) report indicating that the US service sector contracted in May for the first time in a year, while businesses faced higher input costs.
The combination of slowing growth and rising inflation presents a significant challenge for the Fed, which can only address one of these issues at a time.
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