Fed Report Could Signal More Rate Cuts Ahead

The Federal Reserve Board's latest summary of economic activity, issued last week, found more signs of contraction than recovery in the U.S. economy, although the Boston district reported signs of life in the software industry. The economy generally remained soft during October and the first half of November, with particular weakness in manufacturing and a mixed report on consumer spending, according to the latest Beige Book survey of anecdotal business evidence from economists at the Fed's 12 member banks.

Computer prices were lower amid a mostly stable overall price environment, and the Boston district reported that software demand rebounded in October after falling off in September. The Beige Book, published eight times a year, is prepared for the board's Federal Open Market Committee, which sets monetary policy. Last week's report could make it more likely that the committee in its Dec. 11 meeting will cut its short-term interest rate target below the current 2%, a 40-year low.