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You're probably well aware that this year's holiday season was one for the record books. The Commerce Department yesterday announced a better-than-expected holiday retail sales, buoyed by the a downtick in core inflation and improved prospects for rate cuts.
The Federal Reserve noted that surprise optimism--but also didn't shy away from dampening the mood. In its Beige Book, a survey of regional economic conditions compiled from business contacts nationwide before January 8, the central bank reported that consumer spending either met or exceeded expectations in most of its 12 districts.
"Consumers delivered some seasonal relief over the holidays," the central bank said in the report that was published on Wednesday. The Beige Book is released eight times a year, two weeks before each regularly scheduled Federal Open Market Committee meeting to set interest rates. "Overall, most Districts indicated that expectations of their firms for future growth were positive, had improved, or both."
That optimism, the Fed added, was spurred by "the prospect of falling interest rates." Lower interest rates have implications for everything from lower lending costs to improved vendor terms. But that may be more of a wish than reality. At its most recent meeting in December, the FOMC kept interest rates unchanged in a range of 5.25 to 5.5 percent, but in its Summary of Economic Projections, suggested they could cut rates by 0.75 percent this year. Investors and analysts had been betting on a more aggressive rate-cutting path for the central bank this year, but Federal Reserve Governor Christopher Waller threw a bit of cold water on those expectations during a speech earlier this week.
"With economic activity and labor markets in good shape and inflation coming down gradually to 2 percent, I see no reason to move as quickly or cut as rapidly as in the past," he said.
In its Beige Book, the Federal Reserve said the most commonly cited risks were the office market, weakening demand, and the 2024 election. Across the country, businesses also expressed concerns about "the high cost and reduced availability of credit," with banks agreeing that access to loans had tightened. A majority of districts reported little to no change in economic activity.
So without movement across these sectors rate cuts may be a ways off, still.
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Businesses Enjoyed a Happy Holiday Season as Visions of Rate Cuts Danced In Their Heads. The Fed Has Other Ideas
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19.01.2024
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You're probably well aware that this year's holiday season was one for the record books. The Commerce Department yesterday announced a........
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