Optimistic Fed Report Puts Pressure on Rate Hike

What Happened:

The Federal Reserve's Beige Book report on Wednesday showed "modest to moderate" economic growth in recent weeks across much of the country, potentially setting the stage for an interest rate hike in the not-so-distant future.

The notably bullish document, which is released eight times each year and provides anecdotal accounts of regional economic performance, reported employment growth in "most districts" and wage gains in "all but one district (Atlanta)." Progress on inflation and consumer and business spending was also reported.

What It Means:

"The Federal Reserve's latest Beige Book on regional economic conditions was generally upbeat, with respondents expecting continued near-term economic expansion," Gus Faucher, deputy chief economist at The PNC Financial Services Group, wrote in a research note Wednesday.

Indeed, progress on the inflation and employment fronts suggests another interest rate increase could be around the corner. The Fed could raise rates as early as later this month, but most analysts expect June to be the next reasonable opportunity for an uptick.

It's worth noting, though, that a handful of indicators released in the last few weeks have left analysts scratching their heads. Some have suggested the Fed's Beige Book borders on overoptimism.

For example, the Beige Book suggested retail sales were in great shape across the country, but official government statistics indicate sales were either flat or down nationally throughout the first three months of the year.

"Consumer spending increased modestly in most districts and retailers generally remained optimistic about the outlook for growth over the remainder of the year. Really?" Lindsey Piegza, chief economist at Stifel Fixed Income, wrote in a research note Wednesday. "Three consecutive months of weak retail sales does little to reinforce optimism for future spending."