Beige Book paints a relatively bright picture of U.S. domestic economy

The Beige Book published by the Federal Reserve eight times a year, summarized comments received from business contacts around the country. According to the Fed’s latest Beige Book report for the period between late-August and early-October U.S. economic activity continued to increase, at a modest to moderate pace. The exception was the New York District, which reported no change in overall economic activity.

Report from the 12 Federal Reserve districts showed that U.S. economy maintained a steady growth during the period, as a tight labor market with nascent wage pressures contributed to a “mostly positive” outlook. Increased shortages of labor, with the tightness coming through on a broader basis should help push inflation toward the Federal Reserve's medium-term target.

Housing expanded in most districts, and “contacts in a few districts expressed optimism about future growth,” the Beige Book said. Prices of consumer goods increased only mildly, with only selected reports of increases across some Districts and sectors, it added.

The Federal Open Market Committee (FOMC) next meets Nov. 1-2. Investors saw about a 17 percent probability of an interest-rate increase at that meeting ahead of the report, according to pricing in federal fund futures contracts, and more than a 60 percent chance that they’ll increase rates by their Dec. 13-14 meeting.

"While we don't expect the Federal Reserve to raise rates in two weeks' time, given the proximity of U.S. presidential election, we expect the Fed to increasingly telegraph a relatively hawkish narrative and raise rates before the year is out," said TD Economics in a report.