The Fed cites a weak US economic outlook as well as “softening” demand.
Prospects for the U.S. economy are flagging as high prices have forced Americans to focus more of their spending on staples and demand is expected to weaken further, according to a Federal Reserve report Wednesday.
The U.S. central bank has been raising interest rates aggressively to cool demand in a bid to tamp down inflation that has reached its highest level in more than 40 years, all while hoping to avoid pushing the world’s largest economy into a downturn.
Recession fears remain fairly widespread, but there are signs that wage and price pressures are beginning to ease, according to the Fed’s latest “beige book” survey of economic conditions.
“The outlook for future economic growth remained generally weak, with contacts noting expectations for further softening of demand over the next six to twelve months,” the report said.
American families have been struggling with a surge in prices, exacerbated by supply chain woes, COVID lock downs in China, and soaring gasoline prices due to Russia’s war in Ukraine.
The Fed this year has increased the benchmark lending rate four times, including two massive three-quarter-point hikes, with another possible later this month.
The beige book said several regions reported that auto sales «remain muted» and manufacturing slowed, while «residential real estate conditions weakened noticeably as home sales fell in all twelve districts».
And although wages continued to rise nationwide, the Fed said there were «reports of a slower pace of increase and moderating salary expectations were widespread».