National Summary - Overall economic activity rose slightly since mid-January, with six Districts reporting no change, four reporting modest or moderate growth, and two noting slight contractions [10] - Consumer spending was lower on balance, with solid demand for essential goods but increased price sensitivity for discretionary items, particularly among lower-income shoppers [10] - Manufacturing activity exhibited slight to modest increases across a majority of Districts, with concerns over potential trade policy changes [10] - Residential real estate markets were mixed, with ongoing inventory constraints and modest declines in construction activity for both residential and nonresidential units [10] Labor Markets - Employment nudged slightly higher on balance, with four Districts reporting a slight increase and seven reporting no change [11] - Job growth was noted in healthcare and finance, while declines were reported in manufacturing and information technology [11] - Labor availability improved for many sectors, although some sectors experienced a tight labor market [11] - Wages grew at a modest-to-moderate pace, slightly slower than the previous report, with easing wage pressures in several Districts [11] Prices - Prices increased moderately in most Districts, with several reporting an uptick in the pace of increase relative to the previous reporting period [14] - Input price pressures were generally greater than sales price pressures, particularly in manufacturing and construction [14] - Many Districts noted higher prices for food ingredients impacting food processors and restaurants, with substantial increases in insurance and freight transportation costs [14] Highlights by Federal Reserve District - **Boston**: Economic activity increased slowly, with a surge in home sales and modest price increases, but employment declined slightly [15] - **New York**: Regional economic activity was little changed, with slight employment growth and moderate wage growth [16] - **Philadelphia**: Business activity declined slightly, with continued slight employment growth and modest wage and price increases [17] - **Cleveland**: Business activity was flat, with consumer spending down and employment levels remaining unchanged [18] - **Richmond**: The regional economy grew modestly, with consumer spending increasing modestly and manufacturing activity unchanged [19] - **Atlanta**: The economy expanded at a modest pace, with steady employment and modest increases in wages and prices [20] - **Chicago**: Economic activity was little changed, with slight increases in employment and moderate wage growth [21] - **St. Louis**: Economic activity and employment were flat, with moderate price increases above expectations [22] - **Minneapolis**: Economic activity was steady, with moderate wage and price increases [23] - **Kansas City**: Economic activity was unchanged, with moderate price increases and steady employment levels [24] - **Dallas**: The economy expanded moderately, with steady employment and little change in wage and price growth [25] - **San Francisco**: Economic activity ticked down, with stable employment levels and slight price and wage growth [26] Banking and Finance - Banking activity was slightly higher among Districts that reported on it, with some banks noting a decline in demand for loans [10][51] - Small-to-medium-sized banks reported a decline in demand for all loan types, while commercial lending saw a slight increase [89]

Core Points - The Federal Open Market Committee (FOMC) held a meeting on January 28-29, 2025, focusing on monetary policy strategy and economic conditions [3][4][6] - The committee reaffirmed its commitment to a 2 percent inflation target and discussed potential revisions to its monetary policy framework in light of recent economic developments [9][14][50] - Economic activity continued to expand at a solid pace, with the unemployment rate stabilizing at a low level and inflation remaining somewhat elevated [24][69][70] Organizational Matters - New members and alternates of the FOMC were elected, including Jerome H. Powell as Chair and John C. Williams as Vice Chair [4][6] - The Federal Reserve Bank of New York was selected to execute transactions for the System Open Market Account (SOMA) [6][7] Monetary Policy Review - The committee is reviewing its monetary policy framework, focusing on the Statement on Longer-Run Goals and Monetary Policy Strategy, with discussions expected to continue in upcoming meetings [9][15] - The review aims to adapt to evolving economic conditions and enhance transparency and accountability in monetary policymaking [10][11] Economic Conditions - Real GDP rose at a solid pace in 2024, with consumer price inflation measured at 2.4 percent in November, down from 2.7 percent a year earlier [26][27] - Labor market conditions remained solid, with the unemployment rate at 4.1 percent in December and average hourly earnings rising 3.9 percent over the past year [27][28] Financial Market Developments - Broad equity price indexes declined moderately, while credit spreads remained tight [16][17] - The expected path of the federal funds rate indicated a potential quarter-point reduction during 2025, with market expectations shifting towards later rate reductions [17][18] Inflation Outlook - Participants noted that inflation had eased significantly but remained above the 2 percent target, with total PCE prices rising about 2.6 percent over the 12 months ending in December [50][51] - Factors contributing to downward pressure on inflation include easing nominal wage growth and well-anchored longer-term inflation expectations [52][53] Committee Policy Actions - The FOMC decided to maintain the target range for the federal funds rate at 4¼ to 4½ percent, emphasizing the need for further progress on inflation before making additional adjustments [66][71] - The committee will continue to reduce its holdings of Treasury securities and agency debt, while monitoring economic conditions closely [66][67]

Economic Activity - Recent indicators suggest that economic activity has continued to expand at a solid pace [1] - The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid [1] - Inflation remains somewhat elevated [1] Monetary Policy Goals - The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run [2] - The risks to achieving its employment and inflation goals are roughly in balance [2] - The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate [2] Federal Funds Rate - The Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent [3] - The Committee will carefully assess incoming data, the evolving outlook, and the balance of risks for future adjustments [3] - The Committee is committed to supporting maximum employment and returning inflation to its 2 percent objective [3] Monetary Policy Implementation - Effective January 30, 2025, the interest rate paid on reserve balances will be maintained at 4.4 percent [8] - Open market operations will be undertaken as necessary to maintain the federal funds rate in the target range [8] - Standing overnight repurchase agreement operations will have a minimum bid rate of 4.5 percent with an aggregate operation limit of $500 billion [8] - The amount of principal payments from Treasury securities maturing will be rolled over at auction, with a cap of $25 billion per month [8] - Reinvestment of principal payments from agency debt and agency mortgage-backed securities will be capped at $35 billion per month into Treasury securities [8]

The Beige Book Summary of Commentary on Current Economic Conditions by Federal Reserve District January 2025 F E D E R A L R E S E R V E S Y S T E M | About This Publication | | ii | | --- | --- | --- | | National Summary | | 1 | | Federal Reserve Bank of Boston | | 5 | | Federal Reserve Bank of New York | | 8 | | Federal Reserve Bank of Philadelphia | | 12 | | Federal Reserve Bank of Cleveland | | 16 | | Federal Reserve Bank of Richmond | | 20 | | Federal Reserve Bank of Atlanta | | 24 | | Federal Reserve ...

FOMC Minutes of the Federal Open Market Committee December 17–18, 2024 FEDERAL RESERVE SYSTEM Minutes of the Federal Open Market Committee December 17–18, 2024 A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors on Tuesday, December 17, 2024, at 10:30 a.m. and continued on Wednesday, December 18, 2024, at 9:00 a.m.1 Developments in Financial Markets and Open Market Operations The manager turned first ...

Economic Projections - The Federal Open Market Committee (FOMC) participants submitted projections for real GDP growth, unemployment rate, and inflation from 2024 to 2027, with longer-run projections based on appropriate monetary policy assumptions [2] - The median projection for real GDP growth in 2024 is 2.5%, with a range of 2.4–2.5%, and the unemployment rate is projected at 4.2%, with a range of 4.2–4.5% [5] - PCE inflation is projected at 2.4% for 2024, with a range of 2.4–2.5%, while core PCE inflation is projected at 2.8%, with a range of 2.8–2.9% [5] Federal Funds Rate Projections - The median projection for the federal funds rate in 2024 is 4.4%, with a range of 4.4–4.6%, and it is expected to decline to 3.0% in the longer run [5] - The September projections for the federal funds rate in 2024 were 4.4%, with a range of 4.4–4.6%, and the longer-run projection was 2.9% [5] Uncertainty and Risks - FOMC participants assessed uncertainty and risks around their economic projections, with some participants judging the uncertainty as "broadly similar" to historical levels [36] - The risks to GDP growth were assessed as "broadly balanced" by some participants, while others viewed them as weighted to the downside or upside [35] - The uncertainty around the federal funds rate projections is significant, with historical confidence intervals being quite wide [80] Historical Projection Errors - The average historical projection error for real GDP growth in 2024 is ±0.8 percentage points, while for the unemployment rate, it is ±0.1 percentage points [76] - The error range for short-term interest rates in 2024 is ±0.1 percentage points, reflecting the uncertainty in forecasting the federal funds rate [76]

Economic Overview - Economic activity has continued to expand at a solid pace, with labor market conditions easing and the unemployment rate remaining low despite a slight increase [1] - Inflation has made progress toward the 2 percent objective but remains somewhat elevated [1] Monetary Policy Goals - The Committee aims to achieve maximum employment and maintain inflation at 2 percent over the longer run [2] - Risks to achieving employment and inflation goals are roughly balanced, with the economic outlook remaining uncertain [2] Federal Funds Rate Adjustment - The Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 4-1/4 to 4-1/2 percent [3] - The Committee will continue reducing holdings of Treasury securities, agency debt, and agency mortgage-backed securities [3] Monetary Policy Implementation - The Board of Governors voted unanimously to lower the interest rate paid on reserve balances to 4.4 percent, effective December 19, 2024 [8] - The Federal Open Market Committee directed the Open Market Desk to maintain the federal funds rate in the target range of 4-1/4 to 4-1/2 percent [8] - Standing overnight repurchase agreement operations will be conducted with a minimum bid rate of 4.5 percent and an aggregate operation limit of $500 billion [8] - Standing overnight reverse repurchase agreement operations will be conducted at an offering rate of 4.25 percent with a per-counterparty limit of $160 billion per day [8] Treasury and Agency Securities Management - Principal payments from Treasury securities exceeding $25 billion per month will be rolled over at auction, with coupon securities redeemed up to the monthly cap [8] - Principal payments from agency debt and agency mortgage-backed securities exceeding $35 billion per month will be reinvested into Treasury securities [8] Primary Credit Rate Adjustment - The Board of Governors approved a 1/4 percentage point decrease in the primary credit rate to 4.5 percent, effective December 19, 2024 [10]

National Summary - Economic activity rose slightly in most Federal Reserve Districts, with modest or moderate growth in three regions offsetting flat or slightly declining activity in two others. Expectations for growth rose moderately across most geographies and sectors [10] - Consumer spending was generally stable, with increased price sensitivity among consumers noted by many businesses. Spending on home furnishings decreased due to limited household mobility, and mortgage demand was low overall [10] - Capital spending and purchases of raw materials were flat or declining in most Districts, with sales of farm equipment being a notable headwind to overall investment activity [10] - Energy activity in the oil and gas sector was flat, while demand for electricity generation continued to grow robustly, driven by rapid expansions in data centers [10] Labor Markets - Employment levels were flat or up slightly across Districts, with subdued hiring activity and low levels of layoffs reported. Many firms expected employment to remain steady or rise slightly over the next year [11] - Wage growth softened to a modest pace across most Districts, with expectations for wage growth also softening. Job growth and wage growth for entry-level positions and skilled trades were exceptions, rising robustly [11] Prices - Prices rose at a modest pace across Federal Reserve Districts, with businesses facing greater difficulty passing costs on to customers. Input prices were rising faster than selling prices for most businesses, leading to declining profit margins [13] - Rising insurance prices were reported as significant cost pressures for many businesses, with expectations for the current pace of price growth to persist [13] Highlights by Federal Reserve District - **Boston**: Economic activity was down slightly, with steady employment and modest wage increases. Consumer spending on restaurants decreased, and commercial real estate activity was flat [14] - **New York**: Regional economic activity expanded slightly, led by strong growth in manufacturing. Employment grew slightly, and wage growth remained moderate [15] - **Philadelphia**: Business activity edged up, with modest growth in manufacturing and a flat consumer spending environment. Inflation expectations rose due to potential tariffs [16] - **Cleveland**: Business activity grew modestly, with robust demand for business services and slight employment growth. Prices and wages increased modestly [17] - **Richmond**: The regional economy grew slightly, with little change in employment levels and moderate wage growth. Price levels were largely unchanged [19] - **Atlanta**: Economic activity grew, with steady employment and slow wage growth. Retail sales improved slightly, while tourism declined modestly [20] - **Chicago**: Economic activity increased slightly, with modest rises in consumer and business spending. Prices and wages rose moderately [21] - **St. Louis**: Economic activity slightly increased, with moderate price increases and slight declines in consumer spending across income distributions [22] - **Minneapolis**: Economic activity increased slightly, with moderate wage growth and flat consumer spending [23] - **Kansas City**: Economic growth was modest, with strong expectations for demand growth and plans to increase hiring and capital expenditures [24] - **Dallas**: Economic activity rose moderately, with growth in nonfinancial services and improved outlooks for demand expectations [25] - **San Francisco**: Economic activity was stable, with generally unchanged employment levels and slight increases in wages and prices [26] Federal Reserve Bank of Boston - Economic activity was down slightly, with steady employment and modest wage increases. Consumer spending was restrained by warm weather affecting seasonal goods purchases [27] - Manufacturing sales increased modestly, driven by strong AI-related demand, while commercial real estate activity was flat [27] - The outlook was neutral on average, with mixed sentiments and elevated uncertainty concerning the economy [27] Federal Reserve Bank of New York - Economic activity expanded slightly, led by strong growth in manufacturing. Employment grew slightly, and wages continued to rise moderately [39] - The housing market remained solid, with a pickup in sales in New York City, while commercial real estate markets steadied after a period of weakness [39] Federal Reserve Bank of Philadelphia - Business activity edged up, with modest growth in manufacturing and steady consumer spending. Inflation expectations rose due to potential tariffs [58] - Employment appeared to rise modestly, with a slight increase in the average workweek reported [59] Federal Reserve Bank of Cleveland - Business activity grew modestly, with robust demand for business services and slight employment growth. Prices and wages increased modestly [81] - Nonresidential construction and real estate activity increased modestly, with expectations for strong growth in demand in the coming months [91] Federal Reserve Bank of Richmond - Economic activity expanded slightly, with consumer spending on retail and tourism flat to up slightly. Employment was little changed, while wages continued to rise moderately [96] - Price levels were largely unchanged, with moderate annual price growth reported in the service sector [98]

Financial Market Developments - Nominal Treasury yields rose notably due to stronger-than-expected data releases and monetary policy communications signaling a more gradual pace of policy easing [1][23] - Broad equity prices increased, reflecting solid incoming data and lower odds of economic weakening [1][26] - The VIX, which measures equity price volatility, increased leading up to the November elections but decreased afterward [1] Federal Funds Rate and Monetary Policy - The federal funds rate path shifted up notably, with a modal expectation of a 25 basis point cut at the current meeting and another cut in December [2][57] - A large majority of survey respondents expected the end of balance sheet runoff to occur around May 2025, with two-thirds anticipating it in the first or second quarter of 2025 [5][57] - The Committee decided to lower the target range for the federal funds rate by 25 basis points to 4½ to 4¾ percent [57][67] Economic Conditions - Real GDP expanded solidly, with job gains moderating and the unemployment rate remaining low at 4.1 percent in October [15][18] - Consumer price inflation was reported at 2.1 percent in September, with core PCE inflation at 2.7 percent [16] - Labor market conditions remained solid, with average hourly earnings rising 4 percent over the past year [18] International Developments - Policy rate expectations declined in most advanced foreign economies, contributing to an increase in the trade-weighted dollar index [6] - Real GDP growth in foreign economies picked up, particularly in the euro area and Mexico, while inflation abroad continued to ease [20][21] Financial Stability and Credit Conditions - The U.S. financial system's vulnerabilities were characterized as notable, with elevated asset valuation pressures and risks associated with commercial real estate [35][50] - Credit remained available for most consumers, although credit availability tightened moderately through September [32] - Delinquency rates on loans to small businesses remained modestly above pre-pandemic levels, while credit quality for large firms and municipalities remained solid [33]

Summary of the Conference Call Industry or Company Involved - The discussion primarily revolves around the Federal Reserve's monetary policy and its implications for the U.S. economy, particularly focusing on interest rates, inflation, and asset prices such as U.S. Treasury yields and gold. Core Points and Arguments 1. **Federal Reserve's November FOMC Meeting** The recent FOMC meeting was relatively uneventful for the U.S. economy, with a key focus on asset price reactions and future monetary policy outlooks [1] 2. **U.S. Treasury Yields** The two-year U.S. Treasury yield fluctuated from 4.19% to 4.26% and back to 4.19%, influenced by the Fed's hawkish statement and the removal of confidence in inflation decline from their communication [1][2] 3. **Inflation Outlook** The Fed's statement indicated a cautious approach to inflation, acknowledging that while inflation has decreased, future inflation trends may remain volatile due to sticky service-related inflation components [2] 4. **Gold Price Reaction** Gold prices rose above $2700, attributed to the Fed's acknowledgment of U.S. debt sustainability issues, which provided a boost to gold as a safe-haven asset [2][3] 5. **Fed Chair Powell's Independence** Powell asserted his independence from political pressures, indicating he would not resign if Trump were to be re-elected, and that legal processes would prevent his removal [3] 6. **Potential for Future Inflation** The end of Powell's term in May 2026 could lead to a more compliant Fed chair under Trump, raising concerns about a second wave of inflation due to potential expansionary fiscal and monetary policies [4] 7. **Short-term Monetary Policy Outlook** The expectation for the February FOMC meeting is a hawkish stance, with potential for a pause in rate cuts due to unfavorable economic data leading up to the meeting [5][6] 8. **Labor Market and Inflation Data** The upcoming labor market data is expected to show modest recovery, but inflation may see a slight rebound in Q4, complicating the Fed's decision-making process [5][6] 9. **Mid-term Rate Cut Expectations** Market expectations suggest up to 3.5 rate cuts by the end of next year, but this may be overly optimistic given the resilient economic conditions anticipated under Trump's policies [6][7] 10. **Long-term Implications for Gold** A potential shift to a dovish Fed chair in 2026 could lead to increased inflation and a decline in real interest rates, which would be favorable for gold prices [8] Other Important but Possibly Overlooked Content - The discussion highlighted the complexities of the U.S. debt situation, emphasizing that while current levels are manageable, the sustainability of this debt is a growing concern [3] - The geopolitical implications of a more isolationist U.S. stance under a future Trump administration could exacerbate inflationary pressures from the supply side [4] - The potential for a significant shift in monetary policy direction post-2026 could have lasting effects on both the U.S. economy and global markets [8]