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© Reuters. FILE PHOTO: An eagle tops the U.S. Federal Reserve building’s facade in Washington, July 31, 2013. REUTERS/Jonathan Ernst/File Photo

(Reuters) – U.S. economic activity increased slightly in recent weeks, and expectations were for continued slow growth in coming months, a Federal Reserve report published on Wednesday showed.

“Overall economic activity increased slightly since late May,” the U.S. central bank said in its latest “Beige Book” compendium of surveys and interviews conducted across its 12 districts through June 30. Five districts reported some growth, five reported no change and two showed modest declines.

“Overall economic expectations for the coming months generally continued to call for slow growth,” the Fed said.

The report was released two weeks before the central bank is due to make its next interest rate decision, with financial markets widely expecting it to raise rates by a quarter of a percentage point after having opted against a hike last month.

Policymakers said then that the hiatus – after raising rates at 10 straight meetings since March 2022 – would allow them more time to assess how the economy was evolving in the face of the aggressive measures they have taken so far to rein in inflation.

Data since the June 13-14 meeting have shown an economy still growing despite expectations that the 5 percentage points of Fed rate increases over the last year or so would tip it into recession. Employers have continued to add more than 200,000 jobs a month, and while consumer outlays for goods have weakened, households continue to spend briskly on services.

That said, the Beige Book roundup was published just hours after the latest reading on consumer prices presented the most benign view of inflation in more than two years. The Labor Department’s consumer price index rose 3% in June from a year earlier, slightly below economists’ forecasts and down by a full percentage point from the month before. It also marked the smallest annual increase since March 2021.

That raised optimism that the Fed’s preferred measure of inflation – the personal consumption expenditures price index – would notch a comparable decline when it is reported at the end of July and bring it closer to the central bank’s 2% target. That figure, last reported at 3.8% for May, will not be published until after the Fed’s July 25-26 meeting.

Projections submitted by policymakers last month signaled that their policy rate may rise by perhaps another half of a percentage point from the current 5.00%-5.25% range by the end of this year. The latest CPI data did little to dissuade financial markets from betting on a rate hike later this month, but it did support investors’ current base case that the Fed will stand pat after that point.

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