(Reuters) - U.S. economic activity slowed from early October through the middle of November, while businesses reported inflation largely moderated and it was easier to hire workers, the Federal Reserve said in a report on Wednesday, underscoring waning economic momentum into the tail end of the year.

The U.S. central bank released its latest temperature check on the state of the economy a day after Fed Governor Christopher Waller, an influential voice on its policy-setting committee, flagged that current progress on lowering inflation means the possibility of a reduction in the Fed's benchmark overnight lending rate next year is coming into view.

"Economic activity slowed since the previous report, with four districts reporting modest growth, two indicating conditions were flat to slightly down, and six noting slight declines in activity," the Fed said in its survey, known as the "Beige Book," which polled business contacts across the central bank's 12 districts through Nov. 17. "The economic outlook for the next six to twelve months diminished over the reporting period."

The Fed kept its policy rate unchanged in the 5.25%-5.50% range earlier this month for the second consecutive meeting after ramping up borrowing costs by more than 5 percentage points over the past 20 months to quell high inflation. The Fed is seeking to weaken the economy just enough to bring inflation down without causing a recession.

The four Fed districts reporting growth were Dallas, Richmond, Atlanta and Chicago. Most districts said growth was down, with the Kansas City Fed reporting consumers increasingly likely to "share a roof and share meals" to manage household budgets, and contacts in the San Francisco Fed district expressing concern over a weaker economic outlook and increased overall uncertainty.

PRICE PRESSURES

Investors expect Fed policymakers to stand pat again at the Dec. 12-13 policy meeting, given the progress made in returning inflation to the central bank's 2% target rate and the fact that it will take more time for the full impact of the rise in its policy rate to filter through the economy.

By the Fed's preferred measure, inflation in September was running at a 3.4% annual rate, down from the 7.1% peak reached in June of last year when pandemic-induced goods and labor supply shortages juiced price pressures. New inflation data is scheduled to be released on Thursday.

There were some hints in the survey that firms are finding it harder to raise prices, potentially an important signal for policymakers on the hunt for signs of further cooling in inflation. "Some firms noted that pricing power was reduced by weakening demand and competition," the Cleveland Fed reported.

The Dallas Fed noted that price pressures were above average in the service sector, but modest in other sectors, adding that "outlooks worsened ... with numerous contacts citing geopolitical instability and high interest rates as headwinds."

The economy grew faster than initially thought in the third quarter, government data showed earlier on Wednesday, but activity appears to have since moderated as higher borrowing costs dampen hiring and spending.

A separate gauge of consumer prices was flat in October, retail spending has weakened, and there has been a slow easing in wage growth, although the labor market still remains tight.

The mixed picture on the labor market featured in the Fed's latest survey, with demand for labor continuing to ease and "flat to modest" increases in overall employment.

Some employers reported feeling comfortable letting go low performers, although "several districts continued to describe labor markets as tight with skilled workers in short supply."

Wage growth remained modest to moderate in most Fed districts, the report said, although some wage pressures did persist.