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Federal Reserve reports growing uncertainty & bleak economic outlook for United States

The Federal Reserve has maintained interest rates at a high level in recent months, following a sharp increase in rates in 2022, to curb persistent inflation by reducing demand

The Federal Reserve stated that reports of growing uncertainty and concerns about risks have made outlooks for the United States economy bleaker.

The opinions coincide with the US central bank’s “beige book” assessment of economic conditions, which revealed that job increases were essentially small to nonexistent and that discretionary expenditure had decreased and consumers had grown more cost-conscious in recent weeks.

From early April to mid-May 2024, activities in the world’s largest economy remained solid. However, the report stated that situations differed between districts and industries.

The Federal Reserve has maintained interest rates at a high level in recent months, following a sharp increase in rates in 2022, to curb persistent inflation by reducing demand.

However, policymakers kept the benchmark lending rate steady at their most recent meeting in May, citing a lack of further progress toward a 2% inflation target.

A sluggish economy may encourage such confidence, but all eyes are on signals that the Federal Reserve may begin reducing rates.

As of right now, high interest rates and stringent credit requirements are impeding lending growth, and they are also negatively affecting home sales.

Consumers in the majority of the Federal Reserve’s 12 districts “pushed back against subsequent price increases” as prices continued to rise, the report stated, which resulted in reduced profit margins.

It went on, “Price growth is anticipated to continue in the short term at a modest pace.”

Amidst weakened business demand, many districts have reported a reduction in hiring expectations.

The Fed report stated that “despite indications of increased uncertainty and greater downside risks, overall outlooks grew somewhat more negative.”

The degree of consumer demand, the timing of Fed rate reductions, and the results of the United States presidential election are a few examples of this uncertainty.

The Federal Reserve will meet again in the middle of June to discuss policy.

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