Economic activity edged up and prices rose moderately in recent weeks, Fed survey shows

According to the Federal Reserve's Beige Book report, U.S. economic activity grew slowly, employment increased modestly, and prices rose gradually over recent weeks. The central bank's policymakers will consider this qualitative data alongside hard economic metrics when deciding whether to raise interest rates during their upcoming September 15-16 meeting.

While the overall outlook remains positive, sentiment is mixed across sectors, with concerns about high energy prices, policy challenges, and international conflicts contributing to uncertainty. Price increases have slowed in three of the 12 Fed districts, accelerated in one, and remained steady in eight. Consumer-facing businesses in certain regions reported that heightened price sensitivity among customers limited their ability to pass through higher input costs.

The Federal Reserve kept its target interest rate range steady at 3.50%-3.75% since December. Some policymakers believe a rate hike is overdue, while others await further evidence of improving inflation before supporting higher rates. Inflation, measured by the Personal Consumption Expenditures Price Index, has been above target for nearly five and a half years.

Despite two recent monthly readings beating expectations, Fed Chairman Kevin Warsh cautioned that the trend has not significantly improved. Financial markets currently estimate a 65% probability of a rate hike this month and a 35% chance of no change, reflecting significant uncertainty as the meeting approaches. The latest Beige Book report is unlikely to sway the decision much, especially considering the volatile Middle East situation, which has driven up oil prices and exacerbated input price pressures in manufacturing, construction, and other sectors.