Fed’s Beige Book shows modest economic growth as prices rise
The Federal Reserve (Fed) released its Beige Book on Wednesday, in which the US central bank stated that economic activity increased modestly since early July, while overall employment rose slightly. Regarding inflation, prices rose in eight districts.
The Federal Reserve's Beige Book released on Wednesday revealed a modest uptick in economic activity since early July, alongside slight gains in overall employment. Inflation saw an increase in eight districts, with heightened pressures affecting manufacturing and construction due to surging energy, raw material, transportation, and petrochemical prices.
Employment rose modestly across the board, with three districts experiencing slight gains, four reporting modest increases, and five seeing no change. The outlook for the coming months remained positive, though sentiment was mixed due to concerns over higher energy prices, policy decisions, and international conflicts. Prices climbed moderately in eight regions, while two reported slight gains, one experienced a minor uptick, and another saw a substantial increase.
The US Dollar was the strongest against the New Zealand Dollar, and the USD/JPY pair showed a significant percentage change. The Federal Reserve's dual mandate to maintain price stability and full employment is achieved through interest rate adjustments. When inflation exceeds 2%, the Fed raises rates, strengthening the Dollar. Conversely, when inflation falls below target or unemployment is high, the Fed lowers rates to encourage borrowing, weakening the currency.
The Fed convenes eight policy meetings annually, with the FOMC assessing conditions and determining monetary policy. In dire circumstances, the Fed may resort to Quantitative Easing (QE), which involves printing more Dollars and purchasing bonds to strengthen the financial system. QE generally weakens the Dollar, while Quantitative Tightening (QT) strengthens it.
Analysts noted a multi-day negative streak in the GBP/USD pair, with the US Dollar rebounding despite mixed market sentiment and geopolitical uncertainties. Gold surged towards $4,400 per troy ounce as the Dollar weakened and geopolitical tensions persisted. WTI Crude Oil prices reached a fresh high since July 24, while the cryptocurrency market exhibited caution, with major tokens consolidating near short-term support levels.
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