Fed (Beige Book): The US economy grew at a modest pace in October

The US economy grew at a modest pace in October and the first half of November, as businesses “struggled” with rising inflation and struggled to fill jobs amid labor shortages, the Fed said in its latest report. Beige Book, published Wednesday.

“Prices have risen moderately to strongly, with increases visible in all sectors of the economy. Significant increases in input costs are being recorded due to strong demand for raw materials, supply chain problems and a ‘tight’ labor market.” , notes the Fed its report on the economy.

Persistent high inflation has already forced the Fed to take action to curb price increases.

On Tuesday, Fed Chairman Jerome Powell told the Senate Finance Committee that the US Federal Reserve would consider accelerating the end of its emergency asset program in a few months due to rising inflationary pressures. economic growth and a significant improvement in the labor market, which, however, has not been offset by an increase in labor supply.

It is recalled that the Fed began to reduce the emergency asset purchase program launched last year to support the US economy in the midst of the $ 120 billion pandemic in early November at a rate of $ 15 billion a month.

At the Federal Open Market Committee (FMOC) meeting on December 14-15, the Fed’s policy makers are expected to increase the rate of decline so that the program ends earlier than mid-June, which was originally planned, so that it has time to prepare the ground for a possible rate hike next year, sooner than expected.

This is because inflation is more than double the target close to the 2% set by the Fed, with Powell even admitting on Wednesday he acknowledged before the Senate that inflationary pressures are not expected to subside before the second half of 2022.

At the same time, many of the Fed’s 12 districts, according to the bank’s Beige Book report, reported that their businesses were having difficulty finding jobs, which led to wage increases.

Almost all Fed regions reported strong wage increases. “Recruitment difficulties and increased turnover have led companies to raise wages and offer additional incentives, such as bonuses and more flexible working conditions,” the report said.

The US unemployment rate is currently at 4.6% and policymakers increasingly believe that although the workforce has shrunk by 3 million since the pre-pandemic era, shortages will not be fully covered. due to the increase in pensions in the last two years.

Elsewhere, the Fed said consumer spending had risen modestly and outlook for overall economic activity remained positive in most areas, but some noted uncertainty over when supply chain and labor shortages would be reduced. .