Expectations of interest rate cuts have been dashed! The Brown Book states that the US economy is showing slight improvement, but inflation is picking up again.

On Wednesday, the latest "Beige Book" released by the Federal Reserve showed that the U.S. economy experienced "slight growth" from late May to early July, improving compared to the previous period when some regions saw a decline in activity. However, along with the growth, there is an increasingly apparent inflationary pressure, especially as the new round of tariff policies by the Trump administration is pushing up costs for businesses, leading to concerns in the market about a rebound in inflation. Atlanta Fed President Bostic stated publicly after the release of the Beige Book that he still leans towards keeping the current interest rates unchanged, pointing out that recent inflation data released "worrisome signals." He emphasized, "We see signs of rising inflation pressure in the economic fundamentals, which is indeed worrisome." In terms of current policy choices, he believes, "Now is not the time to adjust rates. I would choose to wait." The Beige Book shows that all 12 Federal Reserve districts reported varying degrees of economic activity growth, but the overall pace was moderate, and businesses generally held a cautious outlook for the future. Uncertainty remains a key theme, although the frequency of related statements decreased (from 80 times in June to 63 times in July), concerns about the economic and policy outlook have not dissipated. At the same time, all 12 districts reported price increases, especially in the manufacturing and construction sectors, where businesses are generally affected by the increase in raw material costs due to tariffs. The report pointed out, "Many businesses have passed on some costs to consumers through price increases or additional fees, but some choose not to raise prices due to increased price sensitivity of customers, leading to compressed profits." Of particular concern is the recent proposal by the Trump administration to impose new tariffs on some trading partners' goods starting from August 1, which has increased uncertainty for businesses about future price trends. In the June Consumer Price Index (CPI) data, there were signs of price increases caused by tariffs. Although the market widely expects the Federal Reserve to begin lowering interest rates at the September meeting, the Beige Book and Bostic's statements release a more cautious signal. Bostic pointed out that recent inflation data has basically approached the target range set by the Federal Reserve in the past few months, but the latest CPI report "released a completely different signal," indicating that inflation may be at a turning point towards rising again. Additionally, the Beige Book emphasizes that many industry contacts expect cost pressures to continue in the coming months, greatly increasing the possibility of accelerated price increases at the end of this summer. It is because of the continued focus on inflation that Federal Reserve officials refuse to cut interest rates so far, fearing that an early relaxation of policy will trigger a new round of price hikes. Bostic's statements are considered representative of the "wait-and-see" faction within the Federal Reserve. He does not completely rule out the possibility of adjusting policies in the future but is more willing to wait for further clarification of the data at the current stage. His attitude also echoes the Federal Reserve's tone of "keeping higher rates for longer." The challenges facing the current Federal Reserve go far beyond economic data. After President Trump issued remarks about possibly firing Federal Reserve Chairman Powell, although he quickly denied plans to do so, concerns about the Federal Reserve's independence have risen once again. It is widely believed that political factors may further disrupt the Federal Reserve's policy decisions. On the other hand, there are diverging expectations in the market regarding a rate cut by the Federal Reserve. Although the interest rate futures market is still betting on a rate cut in September, signals from the Beige Book and Bostic have dampened this expectation. With price pressures rising again, the Federal Reserve has reason to stand still and wait for a clearer inflation trend.