Economic growth declines, Fed releases signal to slow down interest rate hike.

　　On November 30th, local time, the Federal Reserve released the National Economic Situation Survey Report (also known as the "Beige Book"), which showed that rising interest rates and high inflation continued to put pressure on economic activities, and the growth rate of the US economy slowed down. Federal Reserve Chairman Powell said on the same day that the Fed will continue to raise interest rates, but it may start to narrow the rate hike from December. The signal that the Fed will slow down the rate hike has boosted market confidence to some extent. However, under the current background of high inflation and rising interest rates, the US economic growth prospects are still not optimistic.

　　The negative impact of high interest rates and high inflation continues.

　　The report shows that rising interest rates and high inflation continue to put pressure on economic activities, and economic activities in the United States are basically flat or slightly rising, which is not as good as the moderate growth during the last "Beige Book". Among them, the economies of new york, Kansas City and other jurisdictions declined slightly, and only five jurisdictions experienced slight or moderate economic growth.

　　In the same period, the number of employed people in most jurisdictions increased moderately, but the demand for labor weakened as a whole. Although the labor market is still tense, it is easier for enterprises to recruit and retain existing employees. Science and technology, finance, real estate and other industries are decentralizing layoffs, and some enterprises are reluctant to lay off employees because of recruitment difficulties. On the average, wages have increased at a moderate rate, and the wage pressure in a few jurisdictions has eased. Looking ahead, employment growth tends to be stable or slow down.

　　In terms of prices, consumer prices in most jurisdictions rose moderately or strongly, but the overall increase slowed down, reflecting the double weakening effect brought about by the improvement of supply chain and weakening demand. Retail prices are facing downward pressure, but food prices in some areas have further increased or remained high. Inflation is expected to remain at the current level or rise moderately.

　　According to the contents of this "Beige Book", the rise in interest rates has caused different degrees of negative impact on consumer spending, manufacturing activities, real estate and construction, financial lending, commercial mergers and acquisitions and other fields. The report also shows that concerns about the economic recession are affecting corporate decision-making and consumer behavior in some jurisdictions.

　　The Federal Reserve publishes the "Beige Book" eight times a year, and conducts a thorough analysis of the economic situation in the United States through regional reserve banks. This report is an important reference for the regular meeting of the Federal Reserve’s monetary policy.

　　Or will start to slow down the pace of interest rate hikes.

　　While acknowledging that rising interest rates have brought "side effects" to the economy, the Federal Reserve has also released a signal that it will slow down interest rate hikes. Speaking at the Brookings Institution on November 30th, Federal Reserve Chairman Powell said that the Federal Reserve will continue to raise the federal funds rate, but it may reduce the rate increase from December.

　　Powell said that the Fed "still has a long way to go" from the goal of restoring price stability. Policy measures such as raising interest rates and reducing bonds usually take some time to play a role in the entire economic system. In the future, the Fed will continue to maintain its restrictive monetary policy stance until substantial progress is made in reducing inflation.

　　He said that when the interest rate is close to "the restrictive level enough to reduce inflation", it is "reasonable" for the Fed to slow down the rate hike, and "it may be the time to slow down the rate hike at the December meeting at the earliest". However, at present, the Fed has not made significant progress in reducing inflation.

　　After Powell’s speech, the US stock market soared. As of the close of the day, the Standard & Poor’s 500-stock index rose 3.09%, ending three consecutive days of decline and closing at 4080.11 points; Dow Jones Industrial Average rose 2.18% to 34,589.77 points; The Nasdaq Composite Index rose 4.41% to close at 11,468.00. Affected by the performance of the US stock market and other good news, major stock markets in Asia also generally rose on December 1.

　　In addition, the yield of US Treasury bonds has fallen sharply. According to the Associated Press, the yield of 10-year US Treasury bonds dropped to 3.65% from 3.75% at the close of the previous day. The yield of two-year treasury bonds, which tends to track the market’s expectations of the Fed’s future actions, fell from 4.48% to 4.34%.

　　Greg Basuke, CEO of AXA Investment Company, said that Powell’s statement is the "certainty" that investors are looking for in the Fed’s interest rate hike expectations. It is expected that the Fed will probably raise interest rates by 50 basis points in December.

　　Since March this year, the Federal Reserve has raised interest rates six times in a row, including 75 basis points in the last four times. According to a tracking data of the Chicago Mercantile Exchange, it is estimated that the possibility that the Fed will shrink the rate hike to 50 basis points by then is about 77%.

　　The uncertainty of economic prospects is rising.

　　Although the signal that the interest rate hike will slow down has boosted market confidence to some extent, in the context of high inflation and rising interest rates, the prospects for US economic growth are still uncertain. According to the Beige Book, looking forward to the future, all jurisdictions believe that the uncertainty of the economic outlook has increased, and the pessimism about the economic outlook has also intensified.

　　The latest economic data is mixed. According to the revised data released by the US Department of Commerce on November 30th, the gross domestic product (GDP) of the United States increased by 2.9% at an annual rate in the third quarter of this year, 0.3 percentage points higher than the initial data released at the end of October. However, personal consumption expenditure, which accounts for about 70% of the US economy, increased by 1.7%, still less than the 2% increase in the second quarter. In addition, residential investment contracted for the sixth consecutive quarter, the longest duration since 2006.

　　Data from the US Department of Commerce also showed that the US merchandise trade deficit surged by 7.7% to $99 billion in October due to the decline in exports. Reuters said that the sharp expansion of the trade deficit means that the trade performance may drag down the GDP data in the fourth quarter.

　　The inflation outlook is still facing uncertainty. According to the latest data from the US Department of Labor, the year-on-year increase of the consumer price index (CPI) in October was the smallest since January this year, and the year-on-year increase of the producer price index (PPI) in October has also continued to narrow since June. In this regard, Powell said that short-term data may be deceptive. At present, inflation is still at a high level, and more evidence is needed to prove that inflation is actually declining.

　　In addition, the tension in the labor market has not been significantly improved. The increase in economic uncertainty and the recent layoffs of large companies have made Americans even more reluctant to leave their current jobs. The turnover rate, which is regarded as an indicator of confidence in the job market, has dropped from the previous 2.7% to 2.6%. In November, the recruitment of American companies fell to the slowest pace in the past two years. The increase in the number of job vacancies also shows that the shortage of workers persists, which economists say is one of the reasons for the slowdown in employment growth.

　　Isfar Munir, an economist at Citigroup in new york, said that the data show that the labor market has hardly loosened up so far. Reuters reported that the tight labor market made the Federal Reserve continue to tighten monetary policy, which aggravated the risk of economic recession next year. However, most economists believe that the recession may be short and mild.

　　Powell believes that it is still possible for the US economy to achieve a "soft landing", but the possibility of achieving this result is declining. (Reporter Liao Bingqing comprehensive report)