U.S. economic activity expanded slightly from late February through early April and firms signaled they expect inflation pressures to hold steady, a Federal Reserve survey showed on Wednesday, continuing recent trends that have kept the central bank from being able to cut interest rates.
“Overall economic activity expanded slightly ... Ten out of twelve Districts experienced either slight or modest economic growth,” the Fed said in the survey known as the “Beige Book,” which polled business contacts across the central bank’s 12 districts through April 8. “The economic outlook among contacts was cautiously optimistic, on balance.”
However, that momentum has stalled and even reversed, calling into question whether the Fed, which in March provisionally penciled in three rate cuts this year, will be able to cut its policy rate in the coming months. Investors now only expect a first cut in September and the odds of a second cut are dwindling.
The Fed is expected at the end of its April 30-May 1 policy meeting to leave its policy rate in the current 5.25%-5.50% range, where it has been since last July.
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