By Ann Saphir and Lindsay (NYSE:) Dunsmuir

(Reuters) – The U.S. economy grew at a “modest to moderate” rate in September and early October, as the latest surge of coronavirus cases crested and began to recede, the Federal Reserve said on Wednesday in its latest Beige Book compendium of reports about the economy.

“Outlooks for near-term economic activity remained positive, overall, but some Districts noted increased uncertainty and more cautious optimism than in previous months,” according to the summary of information from the Fed’s 12 regional districts, prepared as part of a broad range of briefings ahead of policymakers’ Nov. 2-3 meeting.

Employment increased, though labor growth was dampened by a low supply of workers, the report said. Most districts reported “significantly elevated prices,” with some expecting high prices to continue and others expecting them to moderate.

Fed officials are poised to begin reducing the central bank’s $120 billion in monthly bond purchases as soon as next month, after what most see as substantial improvement in the labor market since the end of last year, despite unexpectedly weak job growth in August and September.

Inflation has been running well above the Fed’s 2% target for the last several months. Policymakers are keenly focused on the drivers of those price rises and whether they will, as most expect, recede next year.

If not, several policymakers have said recently, the Fed may need to start raising rates sooner than widely assumed.

Wednesday’s report provided some clues in that regard, with most districts reporting price pressures from supply chain bottlenecks as well as from labor constraints.

“Many firms raised selling prices indicating a greater ability to pass along cost increases to customers amid strong demand,” the Fed districts reported.