Fed: US companies grapple with price hikes and labor shortages

The economy of USA expanded at a modest to moderate pace in October and the first half of November, as companies faced rising growth inflation and the problems of filling vacancies amid the labor shortage, showed a survey carried out by the Federal Reserve (Fed).

“Prices rose at a moderate to robust pace, with widespread increases in all sectors of the economy. There were far-reaching increases in input costs stemming from strong demand for raw materials, logistical challenges, and labor market rigidity, “the central bank said in its latest” Beige Book “report, which is compiled with its contacts. commercial throughout the country.

The persistence of stubbornly high inflation has already forced the Fed to act to curb it.

On Tuesday, Fed Chairman Jerome Powell told the Senate Banking Committee that the central bank will consider bringing forward the end of its bond purchase program a few months ahead of schedule due to increased pressures on banks. prices, accelerating economic growth and strong labor earnings that have not been accompanied by an increase in the workforce.

The Fed began in November to reduce its purchases of Treasuries and mortgage-backed securities, introduced to help prop up the economy through the pandemic of COVID-19, and expected to fully complete the $ 120 billion monthly program next June.

Fed officials will discuss a faster timeline at their next December 14-15 meeting as the central bank seeks to curb its monetary stimulus and set the stage for a possible interest rate hike sooner than anticipated next year. .

Inflation is still more than double the Fed’s flexible target of 2% per year, and Powell acknowledged at his Senate hearing that it is not expected to decline until the second half of next year.

Many of the Fed’s 12 districts also reported that companies were having a difficult time filling vacancies, prompting a rise in wages.

Almost all Fed districts reported strong wage growth. “Hiring problems and high turnover rates led companies to raise wages and offer other incentives, such as bonuses and more flexible work arrangements,” the report noted.

Wage inflation shows little sign of abating, and employers in almost every industry are competing to attract workers, who have been quitting at record levels. A high rate of resignations is seen as a sign of confidence as workers leave when they are more confident in their ability to find a new job.

The Fed also said consumer spending increased modestly and the outlook for general activity remained positive in most districts, but some pointed to uncertainty about when the supply chain and labor shortages would ease. .