US Economic Activity Declines as Tariffs Pressure Prices

• S. economic activity has declined, and higher tariff rates have put upward pressure on costs and prices in the weeks since Federal Reserve policymakers last met to set interest rates, the U.S. central bank said on Wednesday in its latest snapshot of the nation's economy.
• "On balance, the outlook remains slightly pessimistic and uncertain, unchanged relative to the previous report," according to the document, known as the "Beige Book" and which is based on surveys, interviews and observations collected from the commercial and community contacts of each of the Fed's 12 regional banks through May 23. "There were widespread reports of contacts expecting costs and prices to rise at a faster rate going forward."
• The Fed has kept its policy rate in the current 4.25%-4.50% range since December. It is widely expected to leave it there for another few months while its policymakers gauge the impact of U.S. President Donald Trump's trade and other policies on inflation and the labour market. Analysts and Fed policymakers alike anticipate that both inflation and labour market data will deteriorate, and the Beige Book suggests that this is already happening, albeit unevenly.
• Meanwhile, in January, all 12 Fed districts reported economic growth; the latest report showed just three did, while half reported economic declines. Tariffs remained a rising concern, along with uncertainty, impacting in particular prices but also expectations for growth.

(Source: Reuters)