WASHINGTON, July 17, 2025 (BSS/AFP) - Many US firms passed along "at least a portion of cost increases" to consumers in recent weeks, as businesses faced higher prices linked to President Donald Trump's tariffs, the Federal Reserve said Wednesday.

Businesses also expect costs to remain elevated, "increasing the likelihood that consumer prices will start to rise more rapidly by late summer," according to the central bank's "Beige Book" survey of economic conditions.

Economic activity nonetheless picked up slightly from late May through early July, the Fed said, but "uncertainty remained elevated, contributing to ongoing caution by businesses."

Consumer spending outside autos also declined in most districts, easing slightly overall.

The survey comes about two weeks before the Fed's next policy meeting in late-July, when observers expect the central bank to again stand pat on interest rates.

Fed officials are closely monitoring the effects of Trump's tariffs on the world's biggest economy as they mull further reductions to the benchmark lending rate.

Economists have warned that the sweeping levies could fuel inflation and weigh on growth, but the impact on costs has been muted for now.

"In all twelve Districts, businesses reported experiencing modest to pronounced input cost pressures related to tariffs, especially for raw materials used in manufacturing and construction," the Fed said Wednesday.

It added that "many firms passed on at least a portion of cost increases to consumers through price hikes or surcharges," even as some avoided doing so over fears that households might be increasingly sensitive to price changes.

"Contacts in a wide range of industries expected cost pressures to remain elevated in the coming months, increasing the likelihood that consumer prices will start to rise more rapidly by late summer," the Fed said.

The central bank added that employment edged up overall but companies were cautious with hiring due to policy uncertainty.

Some districts also noted less availability of foreign-born workers due to restricting immigration policy under the Trump administration.

Reports of layoffs were limited, the report said, but they were "somewhat more common among manufacturers," while many businesses expect to hold off big hiring and layoff decisions until uncertainty eases.

While a recent uptick in consumer inflation could cause the Fed to hold interest rates steady for longer as it seeks to sustainably rein in price increases, a rapidly weakening labor market could change its calculus.