The Federal Reserve (Fed) commented in its latest Beige Book survey released on Wednesday that economic activity increased “slightly to moderately” across the US in late November and December, supported by strong holiday sales.
Key quotes
Economic activity increased slightly to moderately across the twelve Federal Reserve Districts in late November and December.
Consumer spending moved up moderately, with strong holiday sales exceeding expectations.
Manufacturing decreased slightly on the net; some manufacturers stockpiled inventories in anticipation of higher tariffs.
Commercial real estate sales edged up.
More optimism about the 2025 outlook, though concerns remain about immigration and tariff policy affecting the economy.
Employment ticked up slightly, with six Districts reporting increases and six reporting no change.
Wage growth picked up at a moderate pace, but there were reports of easing wage pressures.
Prices increased modestly overall, with growth ranging from flat to moderate.
Market reaction
The US Dollar Index (DXY) is trading 0.04% lower on the day at 109.06, as of writing.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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