(Reuters) - U.S. economic activity was little changed from September through early October while firms saw an uptick in hiring, continuing recent trends that have reinforced expectations the Federal Reserve will opt for a smaller 25-basis-point reduction in borrowing costs in two weeks.

The U.S. central bank's latest temperature check on the health of the economy also showed that inflation pressures continued to moderate.

The economy, and inflation in particular, remains a key issue among voters ahead of the Nov. 5 U.S. presidential election.

"On balance, economic activity was little changed in nearly all Districts since early September, though two Districts reported modest growth," the Fed said on Wednesday in the survey known as the "Beige Book," which polled the business contacts of each of its 12 regional banks through Oct. 11. "Despite elevated uncertainty, contacts were somewhat more optimistic about the longer-term outlook."

The central bank last month began an easing cycle with an unusually large half-percentage-point cut in its policy rate, lowering it to the 4.75%-5.00% range, amid increasing concerns about the labor market. The Fed hiked rates by 525 basis points in 2022 and 2023 to quash high inflation.

A string of stronger-than-expected economic data on consumer spending, job gains and inflation since then has caused investors to dial back bets on the pace and extent of rate cuts.

U.S. job gains increased by the most in six months in September and the unemployment rate fell to 4.1%, while retail sales increased solidly last month.

The resilient economy has been underpinned by firm income growth and ample household savings. Though labor market momentum has slowed, the level of layoffs remains historically low, supporting wage gains.

Investors currently expect the Fed to cut rates by a quarter of a percentage point at its Nov. 6-7 policy meeting, with another reduction of the same size in December.

The Fed, which is aiming to keep the economy humming along and unemployment low while returning inflation to its 2% target, is still keeping a watchful eye on price pressures.

The pace of annual price increases, based on the Fed's preferred measure, slowed to 2.2% in August from 2.5% in July. However, a different measure that strips out volatile food and energy components edged up to 2.7% from 2.6%.