Prospects for the US economy appear to be flagging, with slower growth expected in the coming months, as November’s presidential election and inflation contribute to uncertainty, the Federal Reserve (Fed) said on Wednesday.
There has been “slight to modest” growth in economic activity in most parts of the country over recent weeks, the US central bank said in its “beige book” survey of economic conditions.
However, a growing number of districts have reported “flat or declining activity,” it said.
Photo: Sarah Silbiger, Reuters
“Expectations for the future of the economy were for slower growth over the next six months due to uncertainty around the upcoming election, domestic policy, geopolitical conflict and inflation,” the Fed said.
The bank has been closely monitoring the world’s biggest economy for signs of cooling, as it mulls the right time to start lowering interest rates.
A series of encouraging data recently, including a slower-than-expected inflation figure, have fueled optimism that the Fed can begin reducing rates in September.
For now, wages continue to grow in most areas, although demand for consumer and business loans was soft, the Fed’s report said.
Employment ticked up as well, with most districts reporting flat or slight growth, the report said.
The central bank is becoming more convinced that inflation is headed back to its 2 percent target, Fed Chair Jerome Powell said on Monday, adding that the Fed would cut rates before the pace of price increases actually reached that point.
“If we were to see an unexpected weakening in the labor market, then that might also be a reason for reaction by us,” Powell said.
On Tuesday, Federal Reserve Governor Adriana Kugler said that if the labor market cools too much, with layoffs driving a continued rise in unemployment, it might be apt to cut rates sooner.
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