Fed Report Suggests Modest Growth, Higher Rate Hike Expectations

The Federal Reserve's latest Beige Book report shows that U.S. economic activity increased modestly in recent weeks, but price increases were moderate and employment rose slightly.

According to the Fed, the general outlook for the coming months was positive, but sentiment was mixed across sectors due to heightened uncertainty surrounding higher energy prices, policy, and international conflict.

The pace of price increases slowed in three of the 12 Fed districts, increased in one, and remained unchanged in eight. Consumer-facing contacts noted that customers' heightened price sensitivity limited their ability to pass through input price increases.

Expectations for a rate hike this month are running high after Fed Chairman Kevin Warsh signaled his openness to a rate hike if the data did not give him confidence that underlying inflation is headed to the 2% target 'clearly and at sufficient speed.'