Federal Reserve Reports Slight Improvement in Economic Activity with Stable Employment Levels

The Federal Reserve reported on Wednesday a modest increase in economic activity across most regions of the United States, while employment remained largely stable in recent weeks. 

The latest report, known as the Beige Book, is unlikely to significantly alter policymakers’ outlook on interest rates ahead of the central bank’s meeting in two weeks.

Eight of the twelve Federal Reserve regional banks noted an uptick in economic activity, indicating a slight improvement compared to the previous report.

As for employment, eight banks reported little to no change in employment levels.

Overall price growth was moderate across most regions, with only two districts noting slight increases. Most observers expressed mild optimism, expecting slight to moderate growth in the coming months.

Last year, the Fed cut interest rates by 0.75 percentage points to prevent labor market deterioration. In December, policymakers indicated a preference to maintain rates within the 3.50%–3.75% range temporarily while inflation trends are monitored.

Financial markets expect the Fed to hold rates steady at the January 27–28 meeting. Since last month’s cut: Unemployment slightly declined to 4.4%, while consumer prices rose 2.7% year-over-year in December, close to the Fed’s 2% target.

President Donald Trump has pledged to appoint a new Fed chair who favors a sharper reduction in short-term borrowing costs. Within the Fed, divisions remain:

The December rate cut passed by a 9–3 vote, with the majority citing the need to support a sluggish labor market.

Several dissenting regional presidents expressed concerns that inflation remains the primary risk, favoring a pause in rate adjustments.

Overall, the Beige Book signals a slight improvement in economic conditions, suggesting the Fed may continue with a cautious stance on future rate changes.