Notably, the Fed's Open Market Committee said state and local government spending "looked to be declining at a slower pace than last year," and the trade deficit "widened in December and January, as imports increased more than exports."
But several economic sectors appear to be on firmer ground. Overall, the Fed said, the economy was "expanding moderately."
Policy makers said labor markets "continued to improve and the unemployment rate declined further."
Inflation remained "subdued," between January and mid-March, although prices for crude oil and gasoline "increased substantially."
The Fed, however, did not take the surge in oil prices as a sign that it is time to panic. "Measures of long-run inflation expectations remain stable," the Fed said.
Disposable incomes increased as earnings rose in December and January. "Moreover, households' net worth grew in the fourth quarter of last year and likely was boosted further by gains in equity values thus far this year," the Fed said.
The Fed even noted activity in the housing market had "improved somewhat in recent months." However, housing continued to face headwinds with a "substantial inventory of foreclosed and distressed properties, tight credit conditions ... and uncertainty about the economic outlook and future home prices."
The pace of business spending slowed compared to the fourth quarter of 2010, however, the Fed noted "indicators of firms' equipment spending improved."