WASHINGTON — The US economy expanded at a “modest to moderate pace” in the first months of this year, the Federal Reserve said Wednesday, as it sounded a cautious tone on inflation and the housing market.
As it gears up for a key policy meeting later this month, the Fed said in its periodic Beige Book report that “overall economic activity continued to expand at a modest to moderate pace in January and early February.”
That appeared to be a slight downgrade from the Fed’s report in January, in which a “moderate” expansion was noted.
A slight improvement in the jobs market helped limit the negative impact of price rises, as the cost of commodities, including oil, soared worldwide.
“Labor markets modestly improved across the country,” allowing manufacturers “greater ability to pass through higher input costs to customers,” the Fed noted.
“Several districts described an increase in demand for staffing services, especially for high-skilled IT positions.”
But there was a warning of higher prices to come.
“Retailers in some districts mentioned they had implemented price increases or were anticipating such action in the next few months.”
The Beige Book report will be used at the next meeting of the central bank’s Federal Open Market Committee on March 15.
Meanwhile there was little good news from the crippled housing sector, which has not recovered despite low borrowing rates.
“All districts maintained that the overall level of home sales and construction remained low.”