Beige Book: Fed districts report slight growth, rising business optimism for 2025

The Federal Reserve (Fed) commented in its latest Beige Book survey released on Wednesday that US economic activity increased slightly in November after little change in preceding months, and US businesses grew more upbeat about demand prospects. 

Key quotes

Economic activity rose slightly in most districts.

Three regions exhibited modest or moderate growth that offset flat or slightly declining activity in two others.

Expectations for growth rose moderately across most geographies.

Employment levels are flat to slightly higher, hiring is subdued amid low turnover.

Wage growth softened to a modest pace, except for robust gains for entry-level and skilled trade positions.

Price increases are modest; firms report greater difficulty passing costs to customers.

Consumer spending is stable but price sensitivity is increasing.

Manufacturing activity mixed across regions.

Commercial real estate markets are showing signs of stabilization in some areas.

Market reaction

The US Dollar Index (DXY) is trading 0.01% higher on the day at 106.37, as of writing.

Fed FAQs

What does the Federal Reserve do, how does it impact the US Dollar?

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.

How often does the Fed hold monetary policy meetings?

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.

What is Quantitative Easing (QE) and how does it impact USD?

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.

What is Quantitative Tightening (QT) and how does it impact 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.