US economy grows at moderate pace in June, with tighter labor market and muted inflation pressure, according to the latest survey results released by the Federal Reserve on Wednesday.

"Economic activity expanded across all 12 Federal Reserve Districts in June, with the pace of growth ranging from slight to moderate," said the Fed in its latest Beige Book which gauges its 12 districts' economy.

The majority of the districts expected the economy to grow at a modest to moderate pace in the months ahead, said the report.

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US central bank will continue to raise interest rates gradually and shrink its balance sheet this year, while monitoring inflation closely, Janet Yellen, U.S. Federal Reserve Chair said Wednesday. 

"The (Federal Open Market) Committee continues to expect that the evolution of the economy will warrant gradual increases in the federal funds rate over time to achieve and maintain maximum employment and stable prices," Yellen said in her prepared testimony before the U.S. House Financial Services Committee.

Inflation in the US has softened in recent months, which triggers discussions about the pace and timing of the future rate hikes among Fed officials.

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Consumer spending, which accounts for nearly 70 percent of the US economy, appeared to be rising across a majority of districts, led by increases in non-auto retail sales and tourism, said the report.

According to the report, employment in most districts maintained a modest to moderate pace of expansion, while Atlanta and St. Louis districts noted flat employment levels.

The report showed that labor markets tightened even more for both low and high skilled positions.

Board of Governors of the Federal Reserve System member Lael Brainard said on Tuesday that she would want to assess the inflation process closely before making a determination on further interest rate hikes.

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However, the tight labor market did not push too much upward pressures on wages, which continued to grow at a moderate to moderate pace in most districts.

Prices continued to rise modestly in the majority of districts and a few districts noted that price pressures had eased slightly according to the report.

Fed chair Janet Yellen said on Wednesday that the central bank will continue to raise interest rates gradually and start to shrink its balance sheet this year, while monitoring inflation closely.

(With inputs from Xinhua and AFP)