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Reuters, WASHINGTON, July 9 – The Federal Reserve stated on Friday that shortages of supplies and “hiring challenges” are stalling the US economy’s recovery from the coronavirus outbreak, resulting in a “temporary” bout of inflation. In its semiannual report to Congress on the condition of the economy, the US central bank stated, “Progress on vaccines has led to a reopening of the economy and solid economic growth.” “Shortages of material inputs and challenges in hiring have slowed activity in a number of businesses,” according to the report. The report will be the topic of congressional hearings next week, with testimony from Fed Chair Jerome Powell on the economy’s prospects, inflation, and the shift of monetary policy as the pandemic’s impact fades. The Fed’s assessment, released on Friday, is largely retrospective, but it reflects the central bank’s belief that the recovery is on pace as businesses and people negotiate a difficult economic reopening. Prices have risen faster than projected, for example, and while supply bottlenecks and other factors driving price increases are expected to reduce over time, “short-term upside risks to the inflation forecast have grown,” according to the Fed. Hiring has also slowed for an unanticipated reason: employers want to hire more people, but there aren’t enough people willing to accept those jobs because they’re dealing with continuing health and family issues, and they can rely on government unemployment benefits to help pay the expenses. “Many of these factors should have a lessening effect on participation in the coming months,” the Fed stated, while the speed and strength of the labor market rebound is also unknown. However, data accessible to the central bank suggests that “a further significant increase in demand” occurred from April to June. ” The strength in household spending has remained against a backdrop of elevated household savings, accommodating financial conditions, ongoing government support, and the reopening of the economy,” while the financial system remains “resilient, “According to the Federal Reserve. Howard Schneider contributed reporting.
Paul Simao edited the piece.
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