Fed says inflation is widespread, but prices are widespread

The Federal Reserve said that the U.S. economy grew at a modest to moderate pace through mid-November, while price hikes were widespread amid supply-chain disruptions and labor shortages.

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The U.S. central bank said in its Beige Book survey that there were wide-ranging input cost increases stemming from strong demand for raw materials, logistical challenges, and labor-market tightness. Price hikes were widespread across sectors of the economy, with prices at a moderate to robust pace. The report was based on anecdotal information collected by the Fed's 12 regional banks through November 19 and compiled by the Federal Reserve Bank of Chicago.

The outlook for overall activity remained positive in most Districts, but there was some uncertainty about when supply chain and labor supply challenges would be resolved, the Fed said.

The Fed has been considering speeding up how quickly they withdraw from pandemic-related monetary policy support due to higher and more persistent inflation.

The plan announced at the beginning of November will slow purchases by $15 billion a month, and the U.S. central bank is going to phase out its bond buying program in mid- 2022. The policy-setting Federal Open Market Committee will meet in mid-December when they can make a decision to speed up the pace of tapering.

Fed Chair Jerome Powell said earlier Wednesday that it is appropriate that we consider tapering faster at the next meeting so that it wraps up a few months earlier. We have seen inflation be more persistent. Powell told a House Financial Services Committee that the factors that are causing inflation to be more persistent are what are causing it to be more persistent. Policy has adapted to that and will continue to adapt. Regional banks reported an improvement in delinquency rates and higher loan demand from commercial customers, and there was a pickup in activity in the broad finance sector. Some businesses indicated that demand for goods and services remained solid, but some suggested that persistent supply-side disruptions and associated higher costs caused customers to put off spending until availability of products improved or costs came down. There were reports of wage increases. Non-labor costs went up, and pricing power increased. Federal Reserve Bank of Atlanta is a Federal Reserve Bank of Atlanta.

Several contacts noted a shift in their approach to managing supply chain disruptions toward a strategy of holding larger inventories, adding demand for key inputs. Federal Reserve Bank of Kansas City is a federal reserve bank of Kansas City.

The report said that leisure and hospitality activity picked up in most districts as the spread of the Delta variant ebbed in many areas. The results from the Beige Book only show information until mid-November, before the emergence of the omicron variant, which could threaten the recovery of the services sector in the coming months.

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