The Federal Reserve appears comfortable with the current “modest” levels of inflation as several indicators suggest U.S. economic growth is slowing, according to the Fed's internal “beige book” notes. “Reports from all 12 Federal Reserve districts generally indicated continued economic growth during June through mid-July, with numerous individual reports pointing to evidence that the pace of growth has slowed,” the Beige Book, a survey of those districts, said. U.S. stock markets reacted favorably after the notes were released, reversing poor morning trading to end up about half-a-percent higher. Most encouraging to investors was the news that inflation pressures appear to be moderating despite high energy costs, and that increases in wages and in prices of final goods and services remained “modest.” However, the Beige Book gave no indication as to whether the Federal Reserve will continue to raise interest rates by a quarter-percent point—as it has for the past 17 months.
