Fed Survey Finds Supply Chain Shortages Boost Inflation | Economic news


By MARTIN CRUTSINGER, AP Economics Writer

WASHINGTON (AP) – Many parts of the country were hit by supply chain disruptions and labor shortages in November, the Federal Reserve reported on Wednesday.

In a survey of economic conditions in the country, the 12 regional Fed banks found that the economy continues to grow at a modest to moderate pace and that the outlook for future growth remains positive.

But some of the Fed’s business contacts have expressed uncertainty about when problems with supply chain bottlenecks and labor shortages may begin to ease.

In part due to supply chain issues, the price increases were said to have been widespread throughout the economy.

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“There have been huge increases in input costs due to strong demand for raw materials, logistical challenges and tight labor market,” said the Fed’s report, known as the Beige Book.

The Fed’s investigation, based on interviews with business contacts last month in the Fed’s 12 regional banking districts, will form the basis for discussions when central bank officials hold their last meeting of the year on the 14th. and December 15.

In testimony to Congress this week, Federal Reserve Chairman Jerome Powell said the central bank was ready to step up the pace of pulling out the easy money policies it was using to support the economy over the years. Last 20 months.

The Fed had bought $ 120 billion worth of Treasury bonds and mortgage-backed securities since the spring of 2020. At its meeting last month, the central bank announced that it would start cutting back those purchases, which are used to keep long-term interest rates low. , $ 15 billion in November and an additional $ 15 billion in December.

Powell’s comments this week indicated that the Fed may announce at its December meeting that it will make larger monthly cuts in the future so that bond purchases can be fully completed earlier than the due date. the end of June which had been foreseen.

This would pave the way for the Fed to start raising its benchmark interest rate, which was cut to a record low of 0% to 0.25% in early 2020.

The end of bond buying and the start of interest rate hikes are expected to increase borrowing costs for consumers and businesses in order to slow the economy and fight inflationary pressures.

Powell made his comments as inflation peaked in three decades, in large part because the pandemic limited supplies at a time when the reopening of the economy resulted in strong demand.

The Fed report said businesses were complaining of “persistent difficulties in hiring and retaining employees” with many leisure and hospitality companies still limiting hours of operation due to a shortage of workers.

The report says companies have heard various reasons for labor shortages. These included the lack of child care, retirements and lingering safety concerns linked to the persistence of COVID cases. The investigation was conducted before the emergence of the new omicron variant.

“Almost all of the districts have reported strong wage growth,” the Fed said. “Hiring difficulties and high turnover rates have led companies to raise wages and offer other incentives, such as bonuses and more flexible working arrangements. “

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