Por Michael S. Derby
NEW YORK, April 6 (Reuters) – The New York Federal Reserve Bank reported on Thursday that tensions in the international supply chain continued to ease last month, in data that suggested at least some of the pressure that has been pushing the rise inflation is subsiding.
The bank noted that its Global Supply Chain Pressure Index for March stood at -1.06, up from a revised -0.28 in February. Global supply chain issues, which have been a key driver of rising inflation, peaked in December 2021 and have, for the most part, been declining ever since.
Negative readings point to pressures below the historical average.
“Global supply chain conditions have largely normalized after experiencing temporary setbacks around the turn of the year,” the bank said in its report. The latest easing of logistics-related issues was linked to delays and delivery times in Europe, as well as developments in Taiwan.
The March reading was the lowest since -1.2 in August 2009. The index has marked long periods of below-average supply chain stress and was in negative territory during the summer of 2019, before of the start of the coronavirus pandemic. There was also a prolonged period of below-normal supply chain stress between roughly 2011 and 2016.
The New York Fed index points to continued improvements in problems that were once a major driver of the highest levels of inflation seen in the United States in decades. Mounting price pressures have prompted the Fed to embark on a very aggressive campaign of interest rate hikes to reduce inflation, which was 5% in February by a key measure, to the 2% target.
“On the supply side of the economy, disruptions to supply chains have improved overall, though not uniformly,” Cleveland Fed President Loretta Mester said in a speech Tuesday. “This is good news, because price pressures can be eased through further moderation in demand and improved supply,” she added.
Still, as supply chains become less affected by logistics-related problems, the Fed’s efforts to further reduce inflation will become more difficult, as inflation emanates from parts of the economy that are less reactive to changes in short-term borrowing costs, such as the service sector.
(Reporting by Michael S. Derby; Editing in Spanish by Manuel Farías)
