The U.S. economy expanded at a modest-to-moderate pace from early January through mid-February, the Federal Reserve said on Wednesday, although firms were less optimistic amid some uncertainty about the Trump administration's fiscal policies.
Businesses were generally optimistic about the near-term outlook but to a somewhat lesser degree than in the prior report, the U.S. central bank said in its Beige Book survey on the economy, which was collated from anecdotal evidence provided by business contacts across the country.
The Fed raised interest rates for the second time in two years at its policy meeting last December, but is expected to accelerate the pace of monetary tightening this year on the back of a low unemployment rate - currently 4.8% - and rising inflation.
The Beige Book said the job market remained tight with some districts reporting widening labor shortages. A number also said a lack of skilled workers was driving up wages.
Earlier in the week, two influential Fed officials indicated a rate increase could come as soon the next policy meeting in two weeks.
The Fed is awaiting details on President Donald Trump's economic plans, including a possible border tax on imports into the United States, in order to assess how his policies would affect the outlook.
Business contacts in the Fed's Boston and Dallas districts expressed increased uncertainty about the expected policy changes out of Washington.
One firm in Boston said a border adjustment tax would have a big effect on where they located future production facilities and they would be reluctant to commit to new investment without some resolution, according to the report. In Dallas, a few manufacturing contacts said customers were adopting a wait-and-see approach amid the uncertainty.
By contrast, firms in St. Louis said they remained optimistic with confidence improving slightly since mid-November.
The Beige Book was compiled by the New York Fed with information collected on or before Feb. 17.