U.S. economic activity remained stable across most regions, according to the Beige Book released by the Federal Reserve on October 23, and it lowered market expectations for further rate cuts.

A survey conducted by the 12 Federal Reserve Banks showed that economic activity was flat in most regions, with only two districts reporting slight growth. Overall employment saw modest increases, with more than half of the regions reporting slight or moderate job growth, while wage growth continued to slow in several areas.

Prices continued to rise moderately, though businesses in many regions noted that input costs were increasing faster than their selling prices, leading to profit margin compression. Consumer spending showed mixed results, with some regions observing a shift towards less expensive substitute goods.

In terms of business activity, the report indicated that manufacturing activity declined in most regions. The banking sector remained steady with mixed loan demand, but lower interest rates led some banks to express a more positive outlook. The real estate market also remained stable, with national housing inventory increasing and home prices mostly unchanged. However, uncertainty around mortgage rates kept some potential buyers in a wait-and-see mode.

Overall, the steady trends in economic activity, employment, and inflation have dampened market expectations for further rate cuts by the Federal Reserve. The yield on the 10-year U.S. Treasury bond has risen to around 4.2%, and Fed Watch data shows a 97% probability of a 25-basis-point rate cut in November.

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