Supply problems hurt US growth, but could ease, Fed says

The US economy continues to face supply issues that have pushed prices higher in recent weeks, but there are signs that tensions may ease, the Federal Reserve said on Wednesday.

Businesses in several parts of the country noted that “despite strong demand, growth has been constrained by supply chain disruptions and labor shortages,” according to the “beige book” survey by the Fed on economic conditions.

However, the report states that “the outlook for overall activity has remained positive in most districts,” although some noted “uncertainty as to when supply chain and labor challenges -work would diminish “.

Rising inflation is a major problem for the US central bank, and Fed Chairman Jerome Powell made a drastic change on Tuesday, saying he now sees a risk that price hikes will continue for a long time. time.

Powell said he supported a quicker withdrawal from the Fed’s stimulus policies, a move that would open the door to an earlier-than-expected lending rate hike.

Strong pent-up demand from U.S. consumers as the U.S. economy reopens after pandemic shutdowns has posed a challenge for companies struggling to obtain products and materials from overseas suppliers, which in many cases continue to face shortages. restrictions.

The auto industry has been hit hard by a global shortage of major computer chips, but shipping bottlenecks have been felt throughout the economy.

The Fed’s investigation noted “moderate to robust” price increases, “with widespread price increases across all sectors of the economy.”

However, the investigation noted that “the greater availability of certain inputs, notably semiconductors and certain steel products, has led to a relaxation of certain price pressures”.

Strong demand means companies have been able to raise prices with “little hindsight,” the Fed said.

Companies continue to try to add workers to their payroll, but face “persistent difficulties in hiring and retaining employees.”

The report was prepared ahead of the meeting later this month of the Fed’s monetary policy committee, which economists say will now decide to reduce the pace of monthly bond purchases more quickly.

Once the bond purchase is complete, the central bank would be able to raise the benchmark interest rate, which it reduced to zero at the start of the pandemic.

hs / cs

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