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Fed report shows weak growth outlook for US

US Rep. Ilhan Omar (D-MN) (L) talks with Speaker of the House Nancy Pelosi (D-CA) during a rally with fellow Democrats before voting on H.R. 1, or the People Act, on the East Steps of the US Capitol on March 08, 2019 in Washington, DC. (AFP photo)
Federal Reserve Chairman Jerome Powell. (File photo)

The prospects for future economic growth in the US still remain weak as high prices are forcing Americans to spend most of their income on daily necessities, shows a new report by the Federal Reserve.

The Federal Reserve Bank of San Francisco released a report on Wednesday, saying that US economy was balanced between “slight to modest” growth and softening in early July but is headed for “a generally weak” six to 12 months.

"The outlook for future economic growth remained generally weak, with contacts noting expectations for further softening of demand over the next six to twelve months,” the Fed said in its Beige Book report.

Inflation has been running at 40-year highs and more than three times the Fed's target.

The price of food, rent, utilities and hospitality services, in particular, increased markedly across all 12 Fed districts.

Purchasing managers report some lessening of price increases and opening up of supply chains, but the Fed will be watching next week’s consumer price index report for more current evidence that its attempt to curb inflation is working.

That suggests, as of now, the Fed will likely raise interest rates again when it meets later this month.

The Fed has raised interest rates by 225 basis points since March as it lifts its benchmark overnight interest rate to a level consistent with dampening demand across the economy enough to alleviate price pressures and bring inflation back down to its 2% goal.

Analysts, however, warned that the aggressive series of rate hikes needed to bring inflation down may cause a recession.

Fed Chairman Jerome Powell announced on Friday that the bank would keep raising interest rates in an effort to combat inflation.

Acknowledging that taming US inflation will inflict "pain" on American families and businesses, Powel said failure to bring prices down would be even more harmful.

Democratic Senator Elizabeth Warren said in response that she is “very worried” that the Federal Reserve will “tip this economy into a recession.”

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