Fed Releases First Beige Book of the Year, Says “Economic Activity Has Increased”

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According to Financial News, the Federal Reserve (the Fed) has released its regular Beige Book economic report ahead of its first policy rate decision of 2026. The Fed said that while U.S. economic activity has improved over the past few months, companies have begun to pass on the impact of tariffs to consumers.
According to the Consumer News and Business Channel (CNBC) and other U.S. business media, the Fed delivered this assessment in its latest Beige Book published on its website on the 14th (local time). The Beige Book is a report that compiles economic assessments from the 12 regional Federal Reserve Banks, based on analyses of conditions gathered through contacts with local banks, businesses, and experts.
The Beige Book is typically released about two weeks before meetings of the Federal Open Market Committee (FOMC). This edition reflects surveys of regional economic conditions compiled through the 5th of this month, following the previous report at the end of November last year. This month’s FOMC meeting will be held on the 27th and 28th.
In the Beige Book, the Fed stated that “overall economic activity increased at a slight to modest pace in eight of the twelve districts, was flat in three districts, and declined modestly in one district.” It added that this marked an improvement compared with the last three reports, in which most districts had reported little change.
The Fed also judged that consumer spending increased at a slight to modest pace in most districts, supported by the year-end holiday shopping season. However, it found that low- and middle-income consumers are becoming increasingly price-sensitive and are more hesitant to spend on nonessential goods and services.
Labor market conditions were largely unchanged, with eight of the twelve districts reporting no significant change in employment. The impact of Artificial Intelligence (AI) on employment has so far been limited. The Fed expects that AI is unlikely to have an immediate effect on jobs but will exert a greater influence over the next several years.
On prices, the Fed said that only two districts reported slight price increases. At the same time, it noted that “cost pressures stemming from tariffs were a consistent theme across all districts.” The Fed pointed out that “contacts who had initially absorbed tariff-related costs have begun passing them on to customers,” explaining that this was because inventories built up before tariffs were imposed have been depleted and pressure to maintain profit margins has intensified.
Previously, the Fed cut its benchmark interest rate three consecutive times from September through December last year. Markets currently expect the Fed to leave the federal funds rate unchanged at 3.5–3.75% at the upcoming FOMC meeting. The number of rate cuts projected for this year is roughly two.
 
pjw@fnnews.com Park Jong-won Reporter