The US Federal Reserve (FED) said on Friday that material shortages and “recruitment difficulties” are hindering the recovery of the US economy from the new corona pandemic and promoting a round of “temporary” inflation. In the semi-annual monetary policy report to Congress, the Federal Reserve stated that the pace and progress of the vaccination drive had enabled all the scopes for the economy to restart booming and promote a rapid and staunch economic growth. Adding to that, the reserve also highlighted that the scarcity of the crucial input materials along with emerging recruitment troubles have been restricting activities in several industries.
This report will be the subject of a congressional hearing next week, when Jerome Powell, Federal Reserve Chairman, will testify on the economic outlook, inflation, and adjustments to monetary policy as the impact of the epidemic subsides. The Fed’s report released on Friday is mainly a review of the past, but it also shows the Fed’s view that as businesses and households deal with a complex economic restart, the recovery is still on track.
The US Fed stated that, for example, prices are rising faster than expected, and although supply bottlenecks and other factors driving price increases are expected to subside over time, the possible alternate risk of the inflation outlook in the quick succession of the term have increased manifold. There is also an unexpected reason for the slowdown in hiring as many of the companies want to hire more employees, but not enough workers are ready to accept these jobs because they are dealing with ongoing health and family issues and can rely on the federal unemployment benefits that are still being issued to help pay the bills.
The Federal Reserve stated that most of such criteria ultimately put an effect on the participation rate of labor which is most likely to gradually fade in the coming future, most probably within a few months of time. However, the speed and strength of the labor market recovery are still uncertain. The Fed also said that existing data show that from the month of April to June, there has been further strong growth in demand. In a recent development, the Fed in context with loose financial conditions, economic re-start, increased household savings, and continued fiscal support, the rate of high spending has continued, and the financial system is to continue being resilient for the time being.