Fed’s Beige Book indicated that U.S. economic activity was largely stagnant over the past period, with most Districts reporting “little or no change”. Across the board, consumer spending was described as “flat to declining” as wages failed to keep pace with rising prices. Uncertainty and tariffs were frequently cited as additional drags on sentiment.

Employment trends also remained subdued, with 11 of the 12 Districts reporting little or no change in job levels and one District citing a modest decline. On prices, most Districts characterized inflation as “moderate or modest”, though two noted strong input cost increases that outpaced selling prices. Nearly all pointed to tariffs as a key driver of higher costs. Looking ahead, firms widely expect prices to continue rising, with three Districts warning the pace of increases could accelerate further.

Full Fed’s Beige Book report here.

Minneapolis Fed President Neel Kashkari said overnight that with the neutral policy rate near 3%, interest rates have “some room to come down gently” over the next couple of years.

Nevertheless, he noted what while headline inflation is being pushed higher by tariffs on goods, other areas like housing are experiencing disinflation, leaving overall price pressures essentially “going sideways.”

Kashkari described the current backdrop as a “tricky situation,” with inflation still too high but the labor market clearly cooling. He stressed that policymakers will need to watch developments carefully before drawing firm conclusions about the path of policy.

While acknowledging risks, Kashkari said he is not forecasting a recession. Instead, he expects the cooling in the labor market to continue in a “somewhat gentle” fashion, suggesting the Fed can gradually reduce rates without tipping the economy into contraction.

Atlanta Fed President Raphael Bostic said today that “price stability remains the primary concern,” after four years above target inflation, though a slowing labor market likely justifies one quarter-point rate cut this year.

Bostic warned that tariffs could add renewed price pressures, with firms unlikely to absorb higher import costs indefinitely. He said the full implications of trade policy shifts, federal deregulation, and tax changes remain unclear and could take months to filter through.

On employment, Bostic noted that hiring has slowed but so has labor supply growth, keeping the economy close to full employment. Bostic said, while “the labor market is slowing enough that some easing in policy – probably on the order of 25 basis points – will be appropriate over the remainder of this year.”

St. Louis Fed President Alberto Musalem said today that the current “modestly restrictive” policy rate is consistent with full employment and core inflation still nearly one percentage point above target.

He warned, however, that a variety of labor indicators—including upward moves in unemployment measures and downward revisions to jobs data—have increased the risk of a sharper slowdown ahead.

While the job markets in is full employment, he said, “I expect the labor market to gradually cool and remain near full employment with risks tilted to the downside.” On the inflation outlook, Musalem argued that tariff-driven price pressures will be short-lived, fading over the next two to three quarters.

With growth running below trend and inflation expectations steady, he sees little chance of a lasting inflation shock. Still, he cautioned that there is a “reasonable possibility” that above-target inflation could persist longer than desired. He expects inflation to resume its convergence toward 2% in the second half of 2026.

“I will continue to update my outlook and my assessment of the balance of risks to seek a forward-looking path of interest rates that best positions monetary policy for achieving and maintaining maximum employment and price stability for all Americans,” he said.

Fed Governor Christopher Waller said in an interview with CNBC that the central bank should begin cutting rates at its next meeting, noting that policymakers don’t need to follow a fixed sequence. He suggested that multiple cuts could come “over the next three to six months,” depending on the economic data.

Waller acknowledged that tariffs could lift inflation temporarily, but he expects the effect to fade within six to seven months, allowing inflation to resume its path toward the Fed’s 2% target. Given the recent decline in labor demand, he argued it is appropriate to bring the policy rate—currently at 4.25%–4.50%—closer to the estimated neutral rate of 3%.

He also clarified that while he has spoken with Treasury Secretary Scott Bessent, he has not been interviewed for the Fed chair position and has no meetings scheduled. The Wall Street Journal reported that Bessent will begin interviewing candidates for the role on Friday, keeping leadership questions in the spotlight as policy debates intensify.