US Fed Says American Economy Posted “Modest To Moderate” Growth in December To January

The United States saw “modest to moderate” economic growth from December to January even though the corporate turned out to be less optimistic because of multiple downside risks, said the U.S. Federal Reserve.

The economic reports from 12 federal reserve districts, where in each of the districts are monitored by a regional federal reserve bank, were included in the “Beige Book,” a periodic economic snapshot released by the Fed.

“Outlooks generally remained positive, but many districts reported that contacts had become less optimistic in response to increased financial market volatility, rising short-term interest rates, falling energy prices, and elevated trade and political uncertainty,” the Fed wrote in the report.

Manufacturing expanded with a slower pace of growth as was reported by the majority of districts, the Fed said. This slowness was most apparent in the auto and energy industries. in some of the fed districts, there was also a also down in the growth of non-financial services sector and energy sector.

The Fed noted that “firms were struggling to find workers at any skill level” in U.S. labor markets while mentioning about the employment status and price level which are two crucial influencers that dictate the monetary policy. The majority of the districts also noted a rise in input prices.

“Reports often cited rising materials and freight prices as sources of cost increases, and a number of districts said that higher tariffs were also a factor,” the Fed said.

According to economic theory, the Fed could be urged in increasing interest rates in the short term so as to prevent over heating of an economy because of a tight labor market and rising price levels. However, more dovish signals on future rate hikes have been made in recent remarks by top Fed policymakers.

“We’re in a place where we can be patient and flexible and wait and see what does evolve,” Jerome H. Powell, chairman of the Fed, said during an interview at the Economic Club of Washington D.C. on Jan. 10.

When the Fed announced the latest hike in rates in December of 2018, the agency had brought down the growth forecast of the U.S. economy for the entire of 2018 to about 2.3 per cent. According to the forecast of the international financial institution – the World Bank, the rate of growth for the US economy would come down to about 2.5 per cent in 2019.

But during its latest rate hike announcement in December, the Fed had also brought down its projection of the possible number of rate hikes for 2019 from three to two.

(Adapted from XinhuaNet.com)

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Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability, Uncategorized

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