The Federal Reserve is signaling a more cautious approach to interest rate cuts, with its latest Beige Book indicating that \u201cEconomic activity was little changed since last release\u201d.<\/p>\n
This language dampens expectations for an aggressive 50-basis point (bps) cut in September, suggesting the central bank is not yet seeing the significant economic deterioration that would warrant such a move.<\/p>\n
Fed Tone On Economic Activity Shifts<\/strong><\/p>\n The Macro Strategist at The Bear Traps Report, Craig Shapiro<\/strong>, noted the stark difference in the Fed\u2019s tone compared to a year ago when a 50bps cut followed a Beige Book that said, \u201ceconomic activity flat or declined in most districts\u201d.<\/p>\n In a post on X, Shapiro stated, \u201cIt is very rare for the Fed to acknowledge declining economy activity\u201d.<\/p>\n He argues that the current, less severe language suggests a \u201cslower rate cutting cycle\u201d for easing monetary policy.<\/p>\n \u201cIt doesn\u2019t appear that the Fed is yet seeing such a deterioration in the economy to warrant another 50bps cut in September,\u201d Shapiro wrote.<\/p>\n A year ago, with the release of the Beige Book in early September ahead of the Fed’s decision to cut interest rates by 50bps, the Fed mentioned that “economic activity flat or declined in most districts.” It is very rare for the Fed to acknowledge declining economy activity and\u2026<\/p>\n \u2014 Craig Shapiro (@ces921) September 3, 2025<\/a>\n<\/p><\/blockquote>\n Beige Books Observes Flat To Declining Consumer Spending<\/strong><\/p>\n The Federal Reserve\u2019s report, a summary of economic conditions across its 12 districts, paints a picture of a stalled economy. The national summary released on Sept. 3, found that most districts \u201creported little or no change in economic activity\u201d.<\/p>\n The report highlighted that for many households, \u201cwages were failing to keep up with rising prices,\u201d leading to flat or declining consumer spending.<\/p>\n See Also: Truflation\u2019s Inflation Spike Rockets To 7-Month Peak, Casting Doubt On Fed Rate-Cut Cheerleaders, Says Jim Bianco<\/a><\/strong><\/p>\n Labor Market Shows Signs Of Cooling<\/strong><\/p>\n Furthermore, the labor market shows signs of cooling, with eleven districts describing \u201clittle or no net change in overall employment levels\u201d and seven noting that firms were hesitant to hire due to weaker demand or uncertainty.<\/p>\n While price growth was characterized as \u201cmoderate or modest\u201d in ten districts, concerns about inflation persist, with nearly all districts noting tariff-related price increases, Shapiro also observed that the Fed seems \u201cto be more concerned about inflation today than they were back then.\u201d<\/p>\n Economic Activity And Inflation Suggest Fed Could Be Slow<\/strong><\/p>\n This combination of stagnant growth and persistent, albeit moderate, inflation supports the case for a more gradual approach from the Fed.<\/p>\n Shapiro concluded, \u201cAll of this argues for slower rate cutting cycle than not. If the economy is actually slowing more rapidly than this, the Fed will be slow and late and risk asset markets will not like it\u201d.<\/p>\n Price Action<\/strong><\/p>\n The\u00a0SPDR S&P 500 ETF Trust<\/strong>\u00a0(NYSE:SPY<\/a>) and\u00a0Invesco QQQ Trust ETF<\/strong>\u00a0(NASDAQ:QQQ<\/a>), which track the S&P 500 index and Nasdaq 100 index, respectively, rose in premarket on Thursday. The SPY was up 0.15% at $644.73, while the QQQ advanced 0.23% to $571.37, according to\u00a0Benzinga Pro<\/a>\u00a0data.<\/p>\n Read Next:<\/strong><\/p>\n Disclaimer:<\/strong>\u00a0This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.<\/p>\n Photo Courtesy: Tanarch on Shutterstock<\/p>\n\n