US Fed: "Growth Slows Due to Supply Shortages and Labor Shortage"

Ahead of November FOMC, Beige Book Released
"Significant Price Increases in Most Regions"
Tapering Possible as Early as Next Month

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] The U.S. Federal Reserve (Fed) has assessed that the pace of economic growth is slowing due to supply chain bottlenecks and labor shortages.

In the Beige Book economic report released on the 20th (local time), the Fed stated, "Economic activity has increased at a moderate pace in recent weeks, but growth has slowed in most regions."

The Fed cited "supply chain disruptions, labor shortages, and the COVID-19 Delta variant" as the reasons.

While the Fed said, "The short-term economic outlook remains generally positive," it also noted that "some jurisdictions reported increased uncertainty compared to before."

This report evaluated the economic conditions in the 12 Federal Reserve Bank districts from early last month through the 8th of this month.

The Beige Book released on this day serves as foundational material for the Federal Open Market Committee (FOMC) regular meeting scheduled for November 2-3, providing a basis to predict the Fed's future policy direction.

Especially ahead of the November FOMC, where a tapering of asset purchases is expected to be announced, the Beige Book also addressed concerns about inflation.

The Fed pointed out, "Most districts reported significant price increases," adding, "The surge in goods and raw materials prices has fueled inflation."

The global supply shortage and labor shortages caused by the spread of the Delta variant have thus impacted inflation.

According to the Fed, the recent U.S. consumer price index rose 4.3% year-over-year.

This exceeds the Fed's target of 2% by more than double.

The Fed further added, "Many companies are passing costs on to consumers amid strong demand."

The report also noted labor shortages, stating, "Many companies reported high turnover rates as workers left for other jobs or retired," and "Childcare issues and vaccine mandates were widely cited as reasons for high turnover."

Earlier, the U.S. Department of Labor announced that nonfarm payrolls increased by 194,000 in September, which was less than half of the market expectation of a 500,000 increase.

Despite these weak employment figures, the Fed continues to express its intention to begin tapering. This is interpreted as an effort to address inflation concerns caused by raw material shortages and supply constraints amid an expected economic recovery in the long term.

The Fed plans to start tapering as soon as "substantial further progress" toward its inflation and employment goals is confirmed.

At the previous FOMC meeting, the start time was expected to be mid-November or mid-December.

This content was produced with the assistance of AI translation services.