If the Federal Reserve wants to raise interest rates before the end of the year, as is widely believed, its Beige Book just offered more evidence to help make the case. Or not.
If the Beige Book were a song, it would be a very familiar tune, but one with lyrics that don’t tell a clear story. The report notes that economic activity has been largely “modest” or “moderate.” And, one sour note: The highly contentious presidential election is taking a toll as well, with economic uncertainty blamed for holding up some investing and lending.
The Beige Book, a round-up of economic conditions from the Fed’s 12 districts, notes that some worker shortages are prompting employers to pay more, such as in retailing and tourism. Around the San Francisco region, where the unemployment rate was most recently reported at 4.1%, some small business owners “reported the need to reinstate previously dropped health care benefits to attract applicants.”
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As Federal Open Market Committee members have taken part in an increasingly contentious debate whether to boost benchmark rates, key looming questions include the extent of job market slack and whether inflation is on track toward their 2% target. Minutes released from the previous meeting indicate that the rate hike question was a “close call” last month.
On the question of inflation, the Beige Book states flatly: “Overall price growth was mild.” Underscoring the growing divide on monetary policy, some 7 FOMC members voted in favor of standing pat with rates in September, while 3 of them dissented.
As the presidential election reaches its zenith and conclusion, it is weighing on sentiment and economic activity. John Canally, chief economic strategist at LPL Financial, notes, “There were 10 mentions of the upcoming presidential …