The Fed’s Beige Book indicated an economy that has largely stalled, with activity “little changed” across Districts. Consumer spending declined again, while manufacturing posted slight improvement despite the drag from tariffs and uncertainty around their future path. Outlooks were broadly unchanged, though several contacts flagged “increased risk of slower activity in coming months.

The labor market showed clearer signs of easing, with employment slipping “slightly” and around half of Districts reporting “weaker labor demand”. Wage gains were generally “modest”, consistent with a gradual loosening in labor conditions.

Price growth remained moderate but continued to reflect tariff-related pressures on input costs, especially in manufacturing and retail. Firms reported uneven ability to pass these higher costs through, with outcomes shaped by competition, consumer sensitivity, and client resistance. While businesses expect cost pressures to persist, “plans to raise prices in the near term were mixed,” suggesting a more uneven path for inflation heading into early 2026.

Full Fed’s Beige Book report here.

San Francisco Fed President Mary Daly signaled clear support for a rate cut at next month’s FOMC meeting, telling the Wall Street Journal that the Fed now faces greater risk from a sudden deterioration in the labor market than from another inflation flare-up.

She said the job market is “vulnerable enough now” that the risk of a sharp, “nonlinear” weakening is rising, leaving policymakers with less room to react if they wait too long. Daly emphasized that she no longer feels confident the Fed can “get ahead of” labor-market weakening, arguing that the damage from a sudden drop in hiring would be harder to manage than moderating inflation.

On inflation, Daly said the chance of a meaningful reacceleration appears limited, pointing to softer-than-expected tariff-related cost increases this year.

Fed Governor Christopher Waller signaled clear support for a December rate cut, saying most private-sector and anecdotal data since the last FOMC meeting show little improvement in economic conditions. He noted that the labor market “is soft” and “continuing to weaken,” with inflation expected to ease, creating an environment where another cut next month is appropriate.

Waller said the January meeting presents more uncertainty, as the Fed will receive a “flood of data” that had been delayed by the government shutdown. If those releases align with recent trends—softening labor conditions and moderating inflation—then a case for another cut could be made. “But if it suddenly shows a rebound in inflation or jobs or the ⁠economy’s taking off, then it might give concern,”‌” he added.

Beyond policy, Waller confirmed he met recently with Treasury Secretary Scott Bessent to discuss his potential nomination as the next Fed Chair, as the Trump administration moves to select a successor to Jerome Powell. Waller said the meeting went “great,” and argued that the administration is seeking someone with “merit, experience, and knows what they are doing,” adding, “I think I fit that.”

Powell’s term ends in May, leaving a narrow window for the White House to finalize its choice.