Beige Book, Kohn Point to Cut

"The notion of slowing economic activity dominates nearly every section of the beige book," writes Tony Crescenzi, fixed-income strategist at Miller Tabak and contributor to RealMoney.com. "Of particular concern are reports of slowing in job growth and consumer spending. These are forces that once in motion can become self-reinforcing."

The Fed has cut overnight lending rates by a total of 75 basis points at its last two meetings, taking the fed funds target rate down to 4.50%. A number of officials, including Philadelphia Fed President Charles Plosser and Chicago Fed President Charles Evans on Tuesday, have recently hinted that additional easing isn't a guarantee, especially as long as they consider inflation a threat.

Seems like the regional Fed officials are playing bad cop, while the top Fed officials play good cop to the markets. Next up is Chairman Ben Bernanke, who speaks Thursday evening in South Carolina.

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