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2026-06-04 08:30:12
[Fed Beige Book: Warsh's Economy Squeezed by Inflation, Signs of Stagflation Emerge] (1) The Fed's Beige Book shows that from late April to late May, rising energy costs caused by the war with Iran led to inflation in most parts of the United States, which spread to shipping, packaging, groceries and fertilizers. Consumer spending showed signs of weakness: credit card use increased, retail foot traffic decreased, and demand for necessities increased. Industries exhibited a "stagflationary" combination—weak demand and cost pressures. (2) Dallas Fed President Logan said he was increasingly worried that an interest rate hike might be needed later this year. Interest rate futures show that traders expect a 75% probability of a 25 basis point rate hike to 3.75%-4.00% by the end of the year. Warsh will chair his first policy meeting as Fed chairman in two weeks. (3) The Beige Book points out that the construction of AI data centers is driving moderate economic growth and investment demand, but inflationary pressures persist: rising gasoline prices are pushing consumers toward hybrid vehicles or reducing car purchases; energy costs are pushing up fertilizer prices, and New York apple growers expect a reduced harvest; manufacturing companies are experiencing weakened demand due to cautious consumers. Some young workers are seeing a slowdown in hiring due to AI applications.
