San Francisco Fed: Supply chain still fueling inflation

The San Francisco Branch of the US Federal Reserve stated that the disruptions in the global supply chain caused by the Covid-19 outbreak have largely subsided, but their effects continue to feed inflation in the US. The San Francisco Branch of the US Federal Reserve published a new analysis titled "Global Supply Chain Pressures and US Inflation." The analysis recalled that following the onset of the Covid-19 outbreak, global shipping and transportation costs increased and delivery times and backlogs reached historically high levels. The analysis stated that the resulting supply shortages put significant pressure on inflation, and noted that this was estimated to contribute to approximately 60 percent of the upward trend in headline inflation in 2021 and 2022. The analysis conveyed that supply shortages arising from supply chain disruptions have driven most of the increase in inflation since April 2021, and that the easing of these disruptions since mid-2022 has contributed to the slowdown in inflation since then. The San Francisco Fed's analysis highlighted that the contribution of supply chain pressures to inflation "remains positive, reflecting the lagged effects of the shock on inflation."