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Fed sees slow economy
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May 2, 2001: 2:35 p.m. ET
Tone of periodic 'Beige Book' report indicates further rate cuts possible
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NEW YORK (CNNfn) - The Federal Reserve said Wednesday it sees continuing sluggishness in U.S. economic activity, with particular weakness in the manufacturing sector.
"Almost all districts report a slow pace of economic activity in March and early April," the Fed said in its periodic "beige book" report. The report, a summary of national economic activity, will be used by U.S. central bankers when they meet to decide interest-rate policy.
The report's somber tone is likely to reinforce expectations that the Fed will cut interest rates when it meets on May 15, especially since it noted little or no price pressures and slacker conditions in the nation's formerly tight labor markets.
"Industrial activity has continued to weaken, with orders and production having fallen in many districts," the Fed said. "Labor market tightness has eased in almost every district."
The Fed cut interest rates for the fourth time this year on Apr. 18 in an effort to breathe life into the sluggish U.S. economy and avoid a recession.
One worrisome sign for the Fed was a pick-up in energy prices, which the Fed said was replacing its earlier worry about rising labor costs.
"Nearly all districts report that energy costs are up sharply, hitting historic highs in some areas," the Fed said.
The Fed could back away from aggressive rate cuts if it fears it's risking inflation, which high energy costs could help trigger. 
-- from staff and wire reports
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