Research Briefing | Jan 18, 2023

US Fed’s Beige Book showed an economy treading water at year-end

The latest Beige Book revealed an economy that on balance was treading water heading into 2023. The report offered encouraging news on inflation and there were signs of cooling demand for labor, although labor markets remained tight overall.

What you will learn:

  • There is nothing in the Beige Book to knock the Fed off its current policy course. We expect the FOMC to raise rates 25bps at its upcoming meeting, and the risk remains tilted toward additional rate hikes. Fed officials have cautioned on many occasions about the risks of ending its rate-hiking campaign prematurely and will err on the side of risking a recession rather than losing the battle against inflation. We continue to expect a mild recession starting in Q2.
  • Our in-house Beige Book Activity Index (BBAI) slipped to its lowest level since May 2020, with the decline driven by an outright decline in activity in the New York Federal Reserve district.
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