Fed economic optimism shows signs of cooling in some places

Fed economic optimism shows signs of cooling in some places

“Optimism remained high but waned somewhat, as the share of firms expressing positive expectations for continued economic growth over the next six months narrowed,” the U.S. central bank said in its Beige Book survey Wednesday, based on anecdotal reports from its business contacts around the country.

The U.S. economy developed at a modest pace in the last a long time of last year, the Federal Reserve said, yet business assumptions cooled in some places as the omicron variation of the Covid spread. Ten of the Fed’s 12 regional banks said that the omicron variation was influencing activity and adding to labor-market challenges. Officials meet in the not so distant future and are relied upon to signal  they’re prepared to bring interest rates in March from near-zero levels. Omicron stays a source of uncertainty, yet Chair Jerome Powell told lawmakers Tuesday that he anticipates that the economy should have the option to weather it in coming months.

The Beige Book was based on information collected through January 3 and compiled by the Federal Reserve Bank of Kansas City.

“Contacts from most Federal Reserve districts reported solid growth in prices charged to customers, but some also note that price increases had decelerated a bit,” the Fed said.

US central bankers are under pressure from Congress and the public to tackle the hottest inflation since the 1980s. During his confirmation hearing for a second term as central bank chief Tuesday, Powell emphasized that the central bank is focused on price stability.

“If we have to raise interest rates more over time, we will,” Powell told the Senate Banking Committee Tuesday. “We will use our tools to get inflation back.”

Policy makers including Fed Governor Christopher Waller, Atlanta Fed President Raphael Bostic and Cleveland Fed President Loretta Mester have signaled that they want to raise interest rates as soon as March, should current economic conditions hold. In December, all Fed officials indicated that they supported raising rates from near zero sometime this year, with a median estimate showing three hikes in 2022.

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