Prospects for future economic growth remain “generally weak” at a time when rising food and rent prices have forced consumers to shift spending toward essentials, the report says. (known as the Beige Book) from the Federal Reserve released on Wednesday.
“Economic activity has been broadly unchanged since early July […] prospects for future economic growth remain generally weak, and contacts point to expectations of further weakening in demand over the next six to twelve months.” months,” says the Beige Book , based on anecdotal information collected by the Fed’s 12 reserve banks through August 29.
Although there have been signs of a “moderation” in the pace of inflation, price levels remained “very high”, according to the report. “Substantial price increases, particularly for food, rent, utilities and hospitality services, were recorded in all districts,” with most contacts expecting “price pressures to persist at least until end of the year,” the report added.
Inflationary pressure continued to drive consumption patterns away from discretionary items, according to the report. “Most districts reported stable consumption spending as households continued to trade lower and shift spending away from discretionary goods towards food and other necessities.”
A tight labor market continues to underpin wage growth in all districts, although there was some easing in the pace of growth, with reports of “moderation in wage expectations across the board,” according to the Beige Book report.
Despite signs of easing in inflation, price pressures remain too intense for Federal Reserve officials to tone down their comments.
Fed Vice Chair Lael Brainard said on Wednesday that monetary policy will have to be tight for some time, adding that the central bank would need to see “several months of low monthly inflation readings” to be sure inflation is catching up. slowing to the Fed’s 2% target.