(NEW YORK) — U.S. economic activity changed little in recent weeks as hiring stalled, prices grew modestly and the private sector feared uncertainty tied to the 2024 election, a Federal Reserve report released on Wednesday showed.

A rosy outlook nevertheless pervaded the findings, since industry officials anticipated interest rate cuts this year, the report said.

On the whole, the report depicts an economy that has downshifted from blistering growth in the middle of last year, slowing hiring and putting the brakes on price increases.

The report, known as the Beige Book, detailed economic conditions in 12 different regions — known as “districts” — based on the results of interviews with businesses by local Fed officials.

The fresh information suggests that a prolonged period of high interest rates has succeeded in cooling the economy, which could reinforce the Fed’s plans to cut rates in the coming months.

Private sector officials nationwide drew hope from the prospect of such an outcome, the Fed report said.

“Districts continued to note that high interest rates were limiting auto sales and real estate deals; however, the prospect of falling interest rates was cited by numerous contacts in various sectors as a source of optimism,” the report said.

The fresh report appeared to contradict some economic data from recent weeks indicating robust performance.

A stronger-than-expected jobs report demonstrated solid hiring growth in December, rebuking fears of an economic downturn anytime soon.

Consumer prices, meanwhile, rose 3.4% in December compared to a year ago, accelerating markedly from the previous month and defying a smooth path down to normal levels, a report from the Bureau of Labor Statistics last week showed.

Federal Reserve Governor Christopher Waller said Tuesday the central bank expects to cut rates this year, but that it won’t be “rushed” to make the decision soon.

Those remarks helped send treasury yields soaring and major stock indexes tumbling on Wednesday.

The Fed risks a rebound of inflation if it cuts interest rates too quickly. An additional burst of economic activity for an already robust economy could hike demand and raise prices once again.

While the vast majority of districts reported little or no change in economic conditions, three districts reported modest growth and one reported moderate decline, the Fed report said.

Similarly, the report added, most districts described little or no change in overall employment levels. The slow hiring gave businesses in many districts confidence that wage growth would ease in the coming months, the Fed said.

Those expectations align with forecasts at the Fed of continued progress in the inflation fight over the course of this year.

When facing high inflation, policymakers fear what’s referred to as a price-wage spiral, in which a rise in prices prompts workers to demand raises that help them afford goods, which in turn pushes up prices, leading to a self-perpetuating cycle of runaway inflation.

If wage growth slows, however, policymakers gain assurance the economy will avert a spike in prices.

Inflation stands well below last summer’s peak of over 9%, but remains more than a percentage point higher than the Fed’s target rate of 2%.

Many market observers are expecting interest rate cuts as soon as a Fed meeting in March. As of last week, markets put the probability of a rate cut in March at 75%, said Ellen Zentner, chief U.S. economist and managing director at Morgan Stanley.

However, observers holding such expectations “may be in for a disappointment,” Zentner wrote earlier this month, citing strong job gains that allow the Fed to keep rates high without fear of an imminent recession.

The cushion affords Fed policymakers “room to watch and wait,” Zentner added.

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