(Reuters) – The U.S. economy expanded at a moderate pace from February through early April and there was little respite for businesses from high inflation and worker shortages, a Federal Reserve report showed on Wednesday.

The latest anecdotal evidence from U.S. firms paints a picture of an economy which received a boost from falling COVID-19 cases and remains resilient despite high inflation amid gummed up supply chains.

Inflation continues to be a worry, with demand still far outstripping the supply of everything from labor to goods, not helped by recent lockdowns in China to restrict the spread of COVID-19 and a spike in food and energy costs due to Russia’s invasion of Ukraine.

“Supply chain backlogs, labor market tightness, and elevated input costs continued to pose challenges on firms’ abilities to meet demand,” the Fed said in its survey, known as the “Beige Book,” which was conducted across its 12 districts through April 11. “Outlooks for future growth were clouded by the uncertainty created by recent geopolitical developments and rising prices.”

The Fed raised interest rates in March for the first time in three years but they still remain low, currently in the target range of between 0.25% and 0.5%.

It is expected to raise rates by a half percentage point at its next policy meeting on May 3-4 and continue with a series of hikes this year designed to make a hefty dent to high inflation. Consumer inflation rose last month to 8.5%, the highest level since 1981.

The central bank will also in May likely decide to begin the process of reducing its balance sheet, which has ballooned to include roughly $8.5 trillion of U.S. Treasuries and mortgage-backed securities as the Fed sought to keep consumer borrowing costs low during the worst of the COVID-19 pandemic.

U.S. job openings remain near record highs, the unemployment rate is at a two-year low of 3.6% and wages have been boosted at a healthy clip, even if for most workers they have not kept up with inflation.

“Many firms reported significant turnover as workers left for higher wages and more flexible job schedules,” the Fed’s report said.

(Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci)