The U.S. economy expanded at a small to moderate rate in July through mid-August but signs of an acceleration in inflation stayed slight, the most recent poll conducted by the Federal Reserve showed on Wednesday.
“Prices rose modestly overall across the nation,” the central bank said in its Beige Book report of the market, compiled from anecdotal evidence derived from business connections nationally.
Policymakers have raised interest rates twice this year but the possibility of a third in 2017 appears increasingly uncertain against a background of weak cost pressures despite the U.S. economy humming along with low unemployment and continued expansion.
The Fed’s preferred measure of inflation retreated to 1.4 percent in July on a year-on-year foundation, the slowest pace in over 1-1/2 decades.
Lots of the Fed’s 12 districts reported that companies were having difficulty filling job openings at all ability levels, but this wasn’t resulting in a widespread increase to salaries.
“The vast majority of districts reported restricted wage pressures and small to moderate wage growth,” the report said, repeating sentiments expressed in previous Beige Book reports over recent months.
Firms from the Atlanta Fed district, by way of instance, confronted labour shortages but dealt with them by attempting to “increase operational efficiencies by assessing whether to fold 1 project into another, replace places with technology … or change the wages towards development and training of other workers.”
Elsewhere, the Fed reported that consumer spending increased in the majority of districts and that many contacts have become worried about a protracted slowdown in the automobile market.
The slide in inflation prompted powerful Fed Governor Lael Brainard to call on Tuesday for the central bank to postpone raising interest rates until it’s confident the weak readings will rally.
The Fed is seen holding its benchmark rate steady at its next meeting in 2 weeks time, but economists mostly anticipate policymakers will take another step in eliminating accommodation by announcing an impending reduction of the Fed’s $4.2-trillion bond portfolio.