The average inflation rate projected by 167 surveyed dropped to 1.7 percent from the 1.8 percent forecast in May. That's lower than what most private economists calculate annual inflation will be.
The survey was conducted June 11-15.
"Projecting ahead, firms continue to anticipate little or moderate upward pressure coming from input costs over the next 12 months," wrote the authors of the Fed report. "Businesses' expectations for both labor and non-labor costs over the next year declined for the second consecutive month in June."
They also told surveyors that they didn't boost the prices they charge their own customers last year to fatten their bottom line, but they hope to this year. Although sales and profit margins improved slightly in June, both remain below normal.
Labor will exert more pressure on prices next year than it did in the past 12 months, they said, while all of their other costs are expected to generate the same force in the near future as it has.