IMF: Fed policy should be adjusted carefully in response to incoming data; clear Federal Reserve communication will remain essential.

Fed's Beige reports 10 of 12 districts saw slow-to-moderate economic growth, one showed slight decline and one was unchanged. Consumer spending is uneven; rising cost pressures have widened differences across income groups—high-income households remain relatively resilient and less price-sensitive, middle-income households are “scrimping every penny before spending,” and low-income households face greater financial strain. Several districts reported higher credit-card use, softer retail sales and stronger demand for necessities. Auto dealers cited weaker new-car demand due to cost and fuel pressures, with increased purchases of used cars and hybrids. Manufacturing expanded at a moderate-to-strong pace in nine districts, with one district reporting a slight decline. Banking conditions are largely stable, but multiple districts reported rising delinquencies in mortgages, consumer and agricultural loans. Six-month business outlooks were little changed amid elevated uncertainty and signs of weaker consumer spending.

Bullock said the Reserve Bank of Australia has seen signs its rate hikes are starting to work and reiterated the Monetary Policy Committee will take necessary steps to meet its mandate. The RBA hiked at all three meetings this year, lifting the cash rate to 4.35% to curb resurgent inflation. Bullock warned the Middle East conflict could cause an energy shock and prompt second-round inflation. He said the housing market is a rapid transmission channel for policy and has softened, partly reflecting tighter policy. Money markets price a June pause, about a 50% chance of an August hike and a fully priced-in move by December.