U.S. Economic Activity Report

(Reuters) – U.S. economic activity has expanded slightly in most regions since early October, with employment growth "subdued" and inflation rising at a modest pace. Businesses express optimism about the future, according to the Federal Reserve's "Beige Book" summary of surveys and interviews from across the country.

Though growth in economic activity was generally small, expectations for growth rose moderately across most geographies and sectors. The U.S. central bank's report draws on observations from business and community contacts of each of its 12 regional banks through Nov. 22, highlighting that businesses are optimistic about increased demand in the coming months.

These findings will inform Fed policymakers on potential adjustments to the policy rate, currently between 4.50%-4.75%, following reductions in September and November.

The Fed’s last rate-setting meeting of the year is in two weeks, with financial markets anticipating a quarter-percentage-point cut in borrowing costs, despite persistent inflation challenges.

A key measure of underlying price pressures, the 12-month change in the personal consumption expenditures price index (excluding food and energy), has stabilized between 2.6% and 2.8% since May, remaining above the Fed's 2% target.

Nevertheless, many Fed officials are confident that inflation will decrease, especially as short-term borrowing costs exceed what is deemed a neutral level, estimated at a maximum of 3.5% by most policymakers.

With a strong but gradually cooling labor market, Fed officials are cautious about maintaining the policy rate too far above neutral for extended periods.

Economists anticipate that the upcoming monthly jobs report on Friday will reveal a rebound in payroll growth for November following a weak October, influenced by hurricanes in the U.S. Southeast and a resolved strike at Boeing. However, the unemployment rate is expected to rise slightly to 4.2% from 4.1%.