By Yasin Ebrahim
Investing.com -- The outlook for future economic growth remains "generally weak" at a time when rising food and rent prices have forced consumers to switch spending to essentials, according to the Federal Reserve's Beige Book released Wednesday.
"Economic activity was unchanged, on balance, since early July [...] the outlook for future economic growth remained generally weak, with contacts noting expectations for further softening of demand over the next six to twelve months," the Fed said in its Beige Book economic report, based on anecdotal information collected by the Fed’s 12 reserve banks through Aug. 29.
While there have been signs of a "moderation" in the pace of inflation, price levels remained "highly elevated," according to the report. "Substantial price increases were reported across all districts, particularly for food, rent, utilities, and hospitality services," with most contacts expecting "price pressures to persist at least through the end of the year," it added.
The inflation squeeze continued to drive consumption patterns away from discretionary items, the report said. "Most Districts reported steady consumer spending as households continued to trade down and to shift spending away from discretionary goods and toward food and other essential items."
A tight labor market continues to prop up wage growth across all districts, though there was some relief in the pace of growth, with reports of "moderating salary expectations widespread," according to Beige Book report.
Despite the signs of easing inflation, price pressures still remain too hot for the Federal Reserve officials to tone down their hawkish remarks.
Fed vice chair Lael Brainard said Wednesday that monetary policy will need to be restrictive for some time and added that the central bank would need to see “several months of low monthly inflation readings,” to be sure that inflation is slowing to the Fed’s 2% target.
The Fed is widely expected to hike rates by 75 basis points later this month.