Beige Book sees ‘slightly weaker’ U.S. economy — and easing inflation

“This report should give the doves … some additional ammunition in their arguments for the Fed to pause their rate hikes one more time in November,” said chief economist Scott Anderson of Bank of the West.

Here are the highlights of the report:

Economy

Most parts of the country “indicated little to no change in economic activity since the September report,” the Beige Book found.

Only the regions served by the Boston, Chicago and Minneapolis Fed posted somewhat faster growth. The economy was unchanged or a bit weaker in the Fed’s other nine regions.

Inflation

Higher wages, oil prices and insurance costs kept the upward pressure on inflation, the Beige Book found.

Yet businesses “struggled” to pass on cost increases to resistant consumers who have grown more sensitive to prices. The result has been falling profit margins at many firms.

“Overall, firms expect prices to increase the next few quarters, but at a slower rate than the previous few quarters,” the Fed said.

The rate of inflation rose at a 3.7% annual pace as of September, according to the most recent consumer price index. The goal of the Fed is to reduce inflation to 2%.

Labor market

Fed officials had hoped that rising interest rates would reduce the demand for labor and cool off a rapid increase in wages that were contributing to high inflation. The latest Beige Book suggests the Fed is succeeding.

“Labor market tightness continued to ease across the nation,” the Fed said, “and firms were hiring less urgently.”

Businesses said it was a bit easier to hire an retain employees, for one thing. Prospective hires were less aggressive in seeking higher salaries and were less inclined to negotiate existing wage offers.

Companies also reduced bonuses and passed on a greater share of health-care costs to employees.