WASHINGTON: 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 business conditions across the country, the Fed’s 12 regional banks found the economy to be growing at a moderate to moderate pace, and the outlook for future growth remains positive.
But some Fed business contacts expressed uncertainty about when problems posed by supply chain bottlenecks and labor shortages will begin to ease.
Price increases were widely reported throughout the economy, partly due to supply chain problems.
The Fed’s report, known as the Beige Book, said broader input costs were driven by strong raw material demand, logistical challenges and labor market strength.
The Fed survey, which is based on interviews last month with business contacts across all of the Fed’s regional bank districts, will form the basis for discussion when central bank officials hold their last meeting of the year on December 14-15.
In testimony to Congress this week, Federal Reserve Chairman Jerome Powell said the central bank is prepared to accelerate a return to the easy-money policies it has used to support the economy for the past 20 months.
The Fed had been buying $120 billion in Treasury bonds and mortgage-backed securities since the spring of 2020. At its meeting last month, the central bank announced that it would start reducing purchases to keep long-term interest rates low. There was an increase of $15 billion in November and $15 billion in December.
Powell’s comments this week indicate the Fed may announce at its December meeting that it will take bigger monthly cuts in the future to completely eliminate bond purchases before the June end date.
This would clear the way for the Fed to raise its benchmark interest rate, which was lowered from 0% in early 2020 to 0.25%.
Both the end of bond purchases and the beginning of raising interest rates can be expected to slow the economy and raise borrowing costs for consumers and businesses as a way of fighting inflationary pressures.
Powell made his remarks as inflation hit a three-decade high, mainly because the pandemic has limited supply at a time when the economy’s reopening has led to high demand.
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