U.S. companies aren’t passing along higher input costs to consumers in the form of more expensive products and services. Instead, they’re accepting lower profit margins. That’s the gist of the Federal Reserve’s latest Beige Book report, which collects and presents anecdotes on economic trends from policy makers’ business contacts around the country. The finding illustrates a seeming disconnect that policy makers have been puzzling over for months. A declining unemployment rate has failed to boost inflation, which has some of them questioning the wisdom of raising interest rates again this year following hikes in March and June. In the New York Fed district, “input prices continued to rise moderately, while selling prices were flat to up modestly.” A little further down the Atlantic seaboard, in the Philadelphia district, “prices appeared to hold firmer for raw inputs to and intermediate goods from manufacturers, while fewer firms reported increases for prices received for their own goods sold.” Likewise, in the San Francisco district in the western U.S., “overall price inflation was flat, while upward wage pressures intensified and labor market conditions tightened further.” Fed policy makers received similar reports from contacts in the Cleveland, Richmond, Atlanta, St. Louis, and Kansas City districts too. What gives? There are a few hints here and there that the competitive environment is holding businesses back. In the Boston district, for example, “a commercial aviation contact said they continue to feel strong downward price pressure from big customers despite record aircraft sales,” while in the Richmond district, “an architectural firm noted that increased competition over bids was driving fees down slightly.” All of this adds to questions about the core framework Fed officials use to set interest rates, which dictates that an increase in aggregate demand in the form of a lower unemployment rate will put upward pressure on prices. For now, there are precious few signs of that in the U.S. economy.