[1/2]A person arranges groceries at El Progreso Market in the Mount Pleasant neighborhood of Washington, DC, U.S., August 19, 2022. REUTERS/Sarah Silbiger LICENSES RIGHTS
06 September (Reuters) – US economic growth was modest amid a slowing job market and easing inflationary pressures in July and August, according to a Federal Reserve report released on Wednesday, backing expectations that the central bank is either done or not is about to. with interest rate hikes.
“Most districts reported overall price growth slowing,” the Fed said in its latest Beige Book summary of surveys and interviews conducted through Aug. 28 in its 12 districts. She added that “nearly all counties have indicated that companies have renewed their previously unmet expectations.” Wage growth will broadly slow in the near term.
The US Federal Reserve is widely expected to leave its federal funds rate in the current 5.25%-5.50% range at the end of its monetary policy meeting on September 19-20, while opening the door for one last hike leaves a quarter of a percentage point open before the end of the year.
The financial markets are assuming that the Fed’s rate hike campaign, which began 18 months ago, is about as likely to be over.
However, Fed officials are keeping their options open. They believe that the 5.25 percentage point hike in interest rates since March 2022 will slow the economy, limit job growth and, most importantly, curb inflation, which rose to a 40-year high last year.
Data since the Fed last hiked rates six weeks ago tends to support this view, as the economy has added an average of 150,000 jobs per month over the past three months, a sharp drop from the previous three months. Inflation, as measured by the Fed’s preferred measure, was 3.3% in July, compared to 7% last summer.
That’s why even a hawkish politician like Fed Governor Christopher Waller could say that the central bank has time to process new data before deciding whether to hike rates again or leave them at current levels.
Boston Fed President Susan Collins also said earlier Wednesday that the central bank still had room to be patient, but acknowledged that while inflationary pressures are easing, they are still too high.
However, Collins added that she did not believe a “significant slowdown” was needed to bring inflation down and that “price stability is achievable with an orderly slowdown and only a modest increase in the unemployment rate – ideally while retaining some of the favorable ones.” Labor supply dynamics.”
Still, prices continue to rise faster than the Fed’s 2 percent target, employers are creating much more than the 100,000 monthly jobs needed to support population growth, and economic output appears to be the less than 2 percent annual growth rate projected by Fed officials far surpassing say is sustainable in the long run.
According to the latest Beige Book report, many of the Fed’s 12 regional banks noted that the decline was most pronounced in commodity-oriented parts of the economy as price pressure eased.
CONSUMERS TURN TO Borrowing
The report also pointed to some weakening on the fringes of the consumer sector, noting that more and more households had used up savings accumulated during the coronavirus pandemic and were increasingly turning to borrowing. At the same time, the report found evidence that more households were struggling to manage their debt.
The New York Fed district said migrants would strain the local safety net. The report said “housing affordability, homelessness and food insecurity continued to pose challenges for communities” in the San Francisco Fed District, adding that “makeshift housing and food banks have seen increased demand in recent weeks, particularly from older adults.”
The report noted that housing remains a problem and that the supply of single-family homes “remains limited”. Housing is growing, the Fed said, but building affordable housing is being hampered by high financing costs and rising insurance premiums.
Reporting by Ann Saphir; Edited by Andrea Ricci and Paul Simao
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