U.S. economic activity has picked up and employment has been steady in recent weeks, the Federal Reserve said in a report on Wednesday that also pointed to the significant effects of rising energy prices amid the ongoing Iran war.

“The conflict in the Middle East was cited as a major source of uncertainty that led to complex decisions around hiring, pricing and capital investment, with many firms adopting a wait-and-see posture,” the US central bank said in its latest “Badge Book” report, a qualitative roundup that helps people understand their economic policy and their country’s economy. Interest rate decisions.

“The business outlook changes amid widespread uncertainty about future conditions,” it said. The Fed is expected to keep its benchmark overnight interest rate on hold in the current 3.50%-3.75% range at its next policy meeting on April 28-29.

Price increases “were mostly moderate overall,” according to the report, based on surveys and interviews with business leaders and community organizations in all 12 Fed districts. Higher energy costs mean more expensive shipping and higher costs for plastics and fertilizers, the report added, adding that “In addition to energy-related increases, input cost pressures were also widespread. Data in the latest report was collected on or before April 6 and captures the volatile economic mood due to Iran’s shipping disruption. The average price of gasoline in the U.S. has risen by $4 a gallon and fertilizer prices have also increased.

The previous benchmark book, which showed overall optimistic expectations for economic growth and expectations that the pace of price increases would slow, was completed on February 28 before the latest hostilities in the Middle East began.

Inflation estimates

Fed policymakers say they generally “see” a temporary rise in commodity prices, and many say they still expect goods inflation from last year’s tariff shock to ease later this year, a development that would allow them to resume cutting interest rates.

At the same time, inflation has been running above the Fed’s 2% target for more than five years. In the latest data, economists estimated last month not just headline inflation but “core” inflation, which excludes energy and food prices, which policymakers use to gauge future inflationary pressures.

Policymakers largely see the U.S. labor market as stabilizing, with slower job growth balanced by a shrinking workforce amid sharp declines in immigration.

Unemployment fell to 4.3% last month.

The Bage Book noted that wage competition remained “muted” overall, suggesting that the labor market was not adding to inflationary pressures.