On Wednesday, the Federal Reserve released its latest edition of the Summary of Commentary on Current Economic Conditions, more commonly known as the Beige Book. The Book is published in advance of each meeting of the Federal Open Market Committee, which is due to convene March 20-21. The U.S. central bank’s latest report found wages increasing in many areas, bolstering the argument for further interest rate hikes that are seen as inevitable throughout 2018 by many analysts.
This installment of the Beige Book was compiled by the Federal Reserve Bank of San Francisco, based on information culled from each of the bank’s 12 districts on or before Feb. 26, 2018. The Fed’s assessment of overall economic activity in January and February remained mostly in line with the previous Beige Book, expanding at a “modest to moderate” pace. The report also noted “moderate inflation” in most areas.
“Across the country, contacts observed persistent labor market tightness and brisk demand for qualified workers, as well as increased activity at staffing placement services,” the report, released stated. “Most districts saw employers raise wages and expand benefit packages in response to tight labor market conditions.”
The Fed’s outlook in this latest Beige Book looks likely to keep the central bank on course for several more interest rate hikes throughout 2018. The Fed previously raised their benchmark interest rate to a range of 1.25 percent to 1.5 percent during the December 2017 FOMC meeting.
The Beige Book also noted a “marked increase” in steel prices in four of the Fed’s 12 districts. According to the Beige Book, this is likely due to less foreign competition. It’s worth noting, however, in light of President Trump’s decision Thursday to impose a 25 percent import tariff on foreign steel and a 10 percent tariff on foreign aluminum.
These tariffs were opposed by many housing industry experts and organizations, including the National Association of Realtors (NAR), owing to fears that they could spark an international trade war and have a negative impact on the housing market. NAR Chief Economist Lawrence Yun said in a statement, “Tariffs could measurably raise the cost of building materials and hinder home construction of affordable homes.”