The Federal Reserve believes the U.S. economy is advancing at a moderate pace while inflation remains contained, assures its beige book summary of economic conditions. This perception did not encourage the bond markets, however, sending the U.S. Treasury prices sharply down and pushing the yield on the 10-year Treasury note above 4.5% for the first time since last July.

The Fed says that “"the economy has continued to expand at a moderate pace."

"Retail prices were generally flat or up modestly; however, businesses continued to face rising input costs, and a number of districts indicated greater ease in passing along price increases," adds the US central bank in its report.

The Fed is expected to continue with quarter-point increases in its next rate-setting meeting on March 22.

The summary cites moderate overall wage gains and steady labor markets across the US, against heavy hiring in some areas.

Chicago Federal Reserve President Michael Moskow said Wednesday, speaking before Investment Analysts Society of Chicago, that the Fed can go on with the removal of surplus interest-rate accommodation.

"Given the low level of inflation, well-contained inflationary expectations and the remaining slack in the economy, we believe we can remove the remaining policy accommodation at a pace that is likely to be measured," Moskow said.