US Federal Reserve governor, Lael Brainard, said that the inflation rate rose more than expected on the back of a combination of base effects and temporary reopening supply and demand mismatches.
The recent acceleration in US inflation is likely to slow as the economy recovers and business returns to normal, Brainard said in her speech during a virtual event for the Economic Club in New York.
Data by the US Department of Commerce showed that the core personal consumption expenditures (PCE) rose by 3.1% month-on-month (MoM) in April – the highest level since 1992.
“Many businesses shrank in order to survive the pandemic and now may be struggling or moving cautiously to expand capacity,” Brainard said.
“These mismatches are exacerbated in some sectors by idiosyncratic supply disruptions, such as in semiconductors, steel, and lumber,” she further added.
Brainard believes that labor supply is lagging behind demand in several sectors, in part reflecting ongoing concerns about the coronavirus and caregiving responsibilities.
She ruled out the possibility that the supplemental funds provided by unemployment insurance benefits are leading workers to stay on the sidelines as it plays a large role in the April employment report.
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