Market expectations that the Fed will not cut interest rates in January have risen to nearly 100%
On January 15, local time, the Federal Reserve released its latest national economic situation survey report, the “Beige Book”. The report details economic activity in 12 regions of the United States from late November to December 2024, and looks forward to future economic trends.
Overall, the “Beige Book” shows that economic activity in all regions of the United States showed a slight or moderate growth trend during the reporting period. Consumer spending rose moderately, especially during the holidays, and sales performance was strong, exceeding market expectations. In terms of industry, construction industry activity declined, and high material and financing costs became the main factors restricting growth. In terms of manufacturing, the “Beige Book” pointed out a slight decline, but manufacturers in some regions are hoarding inventory. The non-financial services industry as a whole showed a slight growth trend, especially the leisure, hotel and air transportation industries. In terms of agriculture, some regions reported weather-related difficulties.
In terms of inflation, the “Beige Book” shows that prices rose slightly overall during the survey period, which means that inflationary pressures still exist. Based on the current economic situation, the Beige Book predicts that prices in the United States will continue to rise in 2025.
It is reported that the Beige Book is released eight times a year, two weeks before each monetary policy meeting of the Federal Reserve, reflecting the development of the overall US economy during the survey period and the differences in the economies of various regions. This information provides an important reference for the Federal Reserve to formulate future monetary policies. The growth of US economic activity and rising consumer spending shown in the Beige Book may reduce the need for the Federal Reserve to further significantly cut interest rates. At the same time, considering inflationary pressures, the Federal Reserve may slow down the pace of interest rate cuts.
After the report was released, the Chicago Mercantile Exchange’s “Federal Reserve Observation Tool” showed that the market expected the Federal Reserve to have no interest rate cuts in January. The probability has risen to nearly 100%.