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FED: Supply chain shortages are boosting inflation

FED: Supply chain shortages are boosting inflation

On Wednesday, December 1, the U.S. Federal Reserve (FED) released a survey. According to the document, the lack of supply chains and labor shortages significantly affect inflation. 

All 12 Fed banking districts surveyed indicated that the economy continues to grow at a rapid or moderate pace, as reported by the AP agency. But at the same time, some experts voiced concerns regarding vulnerabilities in the supply chains for materials and commodities: “There were wide-ranging input cost increases stemming from strong demand for raw materials, logistical challenges and labor market tightness”.

Such vulnerabilities are supposed to be behind the rapidly rising inflation rate. Over the past year, consumer prices have risen more than 5%, breaking the record of the 1990s. Labor shortages aggravate the problem.

According to Fed chair Jerome Powell, who has addressed Congress this week, the solution is to reduce government stimulus programs. By cutting the purchase of Treasuries, the Fed could start to raise the benchmark interest rate, which recently dropped to a record low of 0.25%. 

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