The outlook: Inflation appears to be showing no signs of slowing down, according to the Fed’s latest Beige Book survey of current economic conditions released on Wednesday.
“Firms reported they expect additional price increases over the next several months as they continue to pass on input costs increases,” the survey found.
The Fed survey includes anecdotes from the central bank’s business contacts. It covers mid-January until mid-February.
The survey found that economic activity expanded at a “modest to moderate pace” over in the first two months of the year. The surge in omicron cases led to some absenteeism from work. In addition, severe winter weather and more social distancing led to weakness in spending in restaurants and bars.
Consumer spending was generally weaker as a result over the period, the Fed said.
But prices charges to customers “increased at a robust pace across the nation.”
Beneath the surface: All 12 of the Fed’s districts reported supply chain issues and low inventories continued to restrain growth, especially in the construction sector. There were “scattered signs” of improving labor supply. Firms said they were continuing to raise wages and introduce workplace flexibility to attract workers – but with mixed success.
Big picture: Fed Chairman Jerome Powell told Congress today that the Fed plans to raise its policy rate by a quarter-point in two weeks. He said the Fed would move first in a careful 25 basis point fashion but could make larger moves if inflation doesn’t cool down.