The near-term outlook for the economy was generally described as stable or having slightly weaker growth. (UBS)

  • "Most Districts indicated little to no change in economic activity since the September report. Consumer spending was mixed...Tourism activity continued to improve...Banking contacts reported slight to modest declines in loan demand. Consumer credit quality was generally described as stable or healthy, with delinquency rates still historically low but slightly increasing...The near-term outlook for the economy was generally described as stable or having slightly weaker growth."
  • "Labor market tightness continued to ease across the nation. Most Districts reported slight to moderate increases in overall employment, and firms were hiring less urgently...Wage growth remained modest to moderate in most Districts. Contacts across many Districts reported less pushback from candidates on wage offers. There were multiple reports of firms modifying their compensation packages to mitigate higher labor costs, including allowing remote work in lieu of higher wages, reducing sign-on bonuses or other wage enhancements, shifting compensation to more performance-based models, and passing on a greater share of healthcare and other benefits costs to employees."
  • "Prices continued to increase at a modest pace overall... Sales prices increased at a slower rate than input prices, as businesses struggled to pass along cost pressures because consumers had grown more sensitive to prices. As a result, firms struggled to maintain desired profit margins. Overall, firms expect prices to increase the next few quarters, but at a slower rate than the previous few quarters."

Some recent economic data has shown considerable strength, including two days ago retail sales data for September and last week's CPI data. The Atlanta Fed's GDPNow tracking estimate for 3Q growth stands at a lofty 5.4% (GDP will be released on 26 October). However, the Beige Book suggests that there isn't an urgent need to raise rates further, and the recent run up in long-term interest rates is another reason for the Fed to be cautious. Markets see little chance of a hike at the upcoming FOMC meeting on 31 October–1 November, but are pricing in around a 50% chance of a hike by January. Fed Chair Jerome Powell will make a speech today that offers a last chance to influence markets before the start of the blackout period ahead of the meeting.

Main contributor - Brian Rose

Original report - No pressure to hike from Beige Book, 18 October 2023.