U.S. businesses see tentative progress on inflation and labor supply, Fed says


Businesses in the United States reported economic activity was unchanged from July to the end of August, with a further slowdown expected over the next year, although they saw some attempts to start up in the ongoing battle against labor shortages. and pricing pressures, a report from the Federal Reserve revealed on Wednesday.

The U.S. central bank released its latest summary of comments from trade contacts nationwide as it ponders whether to make a third consecutive 75 basis point interest rate hike at its meeting. September 20-21 policy or opt for an even higher than usual 50 basis point hike in its attempt to crush high inflation.

“General labor market conditions remained tight, although nearly all districts showed some improvement in labor availability,” the Fed said in its survey, known as the “Beige Book”, which was conducted in its 12 districts until August 29. remained very high, but nine districts reported some degree of moderation in their rate of increase.

On Wednesday, Fed Vice Chairman Lael Brainard said the central bank would maintain tight monetary policy “for as long as it takes” to bring inflation down, but did not address the next policy meeting. .

The Fed has raised interest rates by 225 basis points since March as it raises its benchmark overnight interest rate to a level consistent with a sufficient decline in demand across the economy to ease price pressures and bring inflation back to its 2% target.

These movements are reflected in expectations for the coming year. “The outlook for future economic growth remained generally weak, with contacts noting expectations of further easing in demand over the next six to 12 months,” the Fed report said.

Recession fears

Inflation has hit 40-year highs and more than three times the Fed’s target. Although there are positive signs that supply chain issues are improving and tight labor market conditions are easing, policymakers still fear that higher inflation expectations may take hold among businesses and consumers.

They also signaled growing risks that the aggressive series of rate hikes needed to bring down inflation could trigger a recession.

In the Chicago Fed district, those concerns were apparent, with “many” contacts expressing concerns about the possibility of a recession, while a recruiting firm in the Philadelphia Fed district reported a slowdown. orders “approaching levels consistent with previous recessions”.

U.S. employers hired more workers than expected in August, the Labor Department reported Sept. 2 in its monthly jobs report, but moderate wage growth and a rising unemployment rate also suggest job shortages. workforce could subside.

Elsewhere in the Beige Book, the Fed’s stated goal of cooling inflation without causing unemployment to rise sharply still seemed possible.

“Generally softer economic conditions and some relief from supply disruptions appeared to ease some inflationary pressures,” the Cleveland Fed District said. “While still high, the share of contacts reporting higher input costs and the share of those reporting higher selling prices have fallen to their lowest levels in more than a year.”



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