Fed sees expanding economy; weather hurts retail in New York, Boston: Beige Book

Amid a harsh winter and a mixed bag of data, most Federal Reserve districts reported a expanding economy and a prevailing sense of optimism.

Jobs gained across a variety of sectors, though wage pressures were muted, according to the March summary of economic forecasts the Fed compiled in its Beige Book of indicators.

The weather did take some toll. Boston and New York both reported an impact on retail spending, though ironically the Minneapolis region saw sales off due to the warmer than expected season. Even in Boston, though, the mood was "fairly upbeat this period, notwithstanding the severe weather."

"Nobody seemed to report a negative number on (retail), which is really quite surprising," said John Vail, chief global strategist at Nikko Asset Management. "There are obviously some soft patches out there...It doesn't seem to be as soft as I had expected."

Construction also took a hit from the snow, ice and bitterly cold temperatures, while energy producers said the slump in oil prices would affect capital expenditures.

An independent distributor packs bags of products at the Herbalife distribution center in Carson, California.
Patrick T. Fallon | Bloomberg | Getty Images
An independent distributor packs bags of products at the Herbalife distribution center in Carson, California.

Inflation remained in check, even outside gas prices, which have risen over the past several weeks after sliding in 2014. Wage gains remain muted, despite the Fed's efforts to drive inflation and full employment.

Read MoreDuring crisis, Yellen among biggest Fed pessimists

For the past seven years the Fed has been on an aggressive easing campaign that has kept its target rate mired near zero and its balance sheet at $4.5 trillion, the result of a monthly bond-buying program that was halted in October. Though stock market prices have soared more than 210 percent and unemployment has fallen from a high of 10 percent in 2009 to 5.7 percent, growth in other areas remains slow.

The Fed is preparing for an interest rate increase that Wall Street expects to come later this year.

"They're looking through the present and looking more toward the future," Vail said. "The transitory nature of low inflation and the soft patch related to the weather and port strike is not going to push them too much in any direction. They're pretty much set for an increase going forward."

Improving economic conditions are at the heart of that tightening move, though Fed Chair Janet Yellen has said recently that she's concerned over slack remaining in the labor market that has kept wage gains low.

"Payrolls remained stable or expanded across the districts, and contacts noted employment gains in a broad range of sectors," the Fed statement said. "Wage pressures remained moderate and were limited largely to workers in skilled occupations. Most District contacts cited only flat to slightly increasing prices."

Read MoreYellen lashes out at banks on poor 'values'

The Beige Book is a periodic look at the Federal Reserve's assessment of economic conditions. The report comes out eight times a year.

Recent reports have reflected optimism about economic conditions, though the January report reflected worry over the impact that falling gas prices would have on energy companies and hiring.

The report found only "mixed" conditions on real estate and construction, while conditions for banking and finance were "mostly positive." Consumer spending increased and manufacturing saw "varied" growth.