By Ann Saphir
March 4 (Reuters) – U.S. economic activity rose a bit, prices continued to increase and employment levels were stable in recent weeks, the Federal Reserve said on Wednesday in a report that may leave central bank policymakers puzzling about the path of inflation as they prepare for their next policy meeting in two weeks.
“Overall, economic expectations were optimistic, with most (Fed) districts expecting slight to moderate growth in the coming months,” the U.S. central bank said in its latest “Beige Book” report, a roundup of qualitative economic data from across the country including surveys of and interviews with business leaders and community organizations.
“On balance, firms expected prices to rise at a somewhat slower pace in the near term,” according to the report, which is designed to give Fed officials a granular look at the economy’s health in the runup to their eight yearly rate-setting meetings.
The information in the latest report was gathered on or before February 23, just after the Supreme Court’s invalidation of many of President Donald Trump’s global tariffs and prior to the start of the U.S.-Israeli war with Iran.
The Fed held its benchmark overnight interest rate steady in the 3.50%-3.75% range at its January 27-28 meeting, citing a stabilizing labor market and continued elevated inflation as reasons to pause a string of interest rate cuts in the last three meetings of 2025.
With data since then showing steady growth in the manufacturing sector, a surge in wholesale prices in January, and no obvious labor market deterioration, the central bank was widely expected to leave rates on hold again at its March 17-18 meeting even before the Iran conflict sent oil prices higher.
That new development could leave the central bank on hold for longer due to inflation concerns.
Traders currently don’t expect the Fed to deliver another rate cut until its July 28-29 meeting, when former Fed Governor Kevin Warsh is expected to already be installed as the central bank’s new chief.
Trump submitted his nomination of Warsh to replace Fed Chair Jerome Powell to the U.S. Senate on Wednesday. Powell’s term as Fed chief ends in mid-May, and Warsh is expected to support the rate cuts that Trump wants.
The anecdotes in the latest Beige Book appear to bolster what’s been a growing sense among policymakers that the job market is stabilizing and inflation, though expected to ease later in the year as the effect of tariffs recedes, remains a problem.
Firms and households from across the Fed’s 12 regions continue to grapple with higher prices resulting from the Trump administration’s tariffs, the Beige Book showed. But, it said, “most districts received reports of some firms holding selling prices stable despite higher costs because their customers were increasingly price-sensitive.”
(Reporting by Ann Saphir; Editing by Paul Simao)
