New Delhi, Oct. 15 -- The latest Beige Book report released Wednesday by the Federal Reserve challenged the narrative that the U.S. economy is strong, reporting that momentum slowed a bit as persistently elevated inflation spurred increased consumer caution.

Wednesday's Beige Book proved more downbeat when compared with September's report, especially on economic activity and consumer spending, with signs of increasing inflation pressures. Along with the latest hotter inflation data, it seemed to further strengthen the case for an October rate increase.

In anecdotal surveys, businesses and community members in the 12 Fed districts reported conditions have shifted from steady growth with manageable cost pressures in September to more mute...