Most of the Federal Reserve's 12 districts reported moderate inflation increases in recent weeks, while many of them saw moderate increases in wages, according to the Fed's latest Beige Book.
The report, a summary of anecdotal data gathered by regional Fed officials in their areas, is yet another sign inflation pressures are building and boosting the case for further rate hikes from the central bank. Inflation figures have continually undershot the Fed's goal in recent years, prompting a handful of Fed officials to worry the central bank might be raising interest rates too quickly.
But signs of strengthening inflation have led investors to increasingly anticipate the Fed could raise rates four times this year, higher than the three rate hikes policymakers had signaled in December 2017.
The Beige Book, released March 7, showed little signs of changing that narrative, saying most districts saw employers increase worker compensation due to a tight labor market.
"Across the country, contacts observed persistent labor market tightness and brisk demand for qualified workers, as well as increased activity at staffing placement services," the report said of information collected on or before Feb. 26. "Several Districts reported continued worker shortages across most sectors. ... In many Districts, wage growth picked up to a moderate pace."
A few districts, the report added, reported modest compensation increases following the passage of tax cuts, which sparked a wave of prominent companies announcing bonuses or wage hikes.
Overall, the report said, the Fed's 12 districts all grew "at a modest to moderate pace" in January and February, with mixed figures in consumer spending, modest growth in residential real estate and increased production from manufacturers.
