Fed Minutes Show Supply Chain Woes, Inflation Will Drag On
With supply chain issues at an all time high, inflationary pressures are likely to persist for some time, Fed officials said

Jerome Powell, chairman, Federal Reserve; blockworks exclusive art by Axel Rangel
key takeaways
- Bitcoin and ethereum lost gains following the minutes release, falling 0.8% and 2.6%, respectively
- Federal Reserve officials are starting to backtrack on earlier statements that inflation would be transitory
Federal Reserve officials are becoming increasingly concerned about growing inflation and persisting bottlenecks and supply chain issues, minutes from the Dec. 14-15 Federal Open Markets Committee (FOMC) meeting reveal.
Economic projections released in September stated that most central bank officials did not anticipate rate hikes until 2023. Projections from December however show that the majority of officials expect three rate hikes in 2022.
The shift is a hawkish move from the Fed and Powell, who for months insisted that bottleneck-induced inflation would ease naturally over time. The central bank has since backtracked on earlier statements and taken a more aggressive approach to combat higher prices.
“We are phasing out our purchases more rapidly because with elevated inflation pressures and a rapidly strengthening labor market, the economy no longer needs increasing amounts of policy support,” Powell said during a press conference in December following the conclusion of the two-day FOMC meeting.
Markets respond
Bitcoin and ethereum lost gains following the release of the minutes Wednesday afternoon, falling 0.8% and 2.6%, respectively.
“Bitcoin is in desperate need of a catalyst as crypto traders struggle to buy ahead of the beginning of a Fed rate hiking cycle,” Edward Moya, senior market analyst at Oanda wrote in a recent note. “The cryptoverse remains long-term bullish with Bitcoin and Ethereum but the short-term downward move might not be over.”
Equities also largely fell. The big tech-heavy Nasdaq Composite Index lost 1.4% while the S&P slipped 0.4%.
“Tech stocks remained under pressure after a robust private payrolls report sent Treasury yields higher,” Edward Moya, senior market analyst at Oanda, wrote in a recent note. “Equity traders are still betting on a strong US economy and that has them rotating out of big-tech and embracing cyclicals.”
Gold was trading 0.3% higher Wednesday as the dollar slipped, signaling that Fed rate hikes have largely already been priced in, Moya said.
The minutes come shortly after the New York Fed released its new “Global Supply Chain Pressure Index” Tuesday. The index incorporates the Baltic Dry Index, which measures raw material shipping costs, the Harpex Index, which accounts for container shipping rates, and US Bureau of Labor Statistics data. The index revealed that supply chain pressures at at a historic high.
“The data here shows that supply chain pressures remain extremely elevated and, while the Fed thinks the latest reading says the top is in, we are still far from normal’,” said Nicholas Colas, co-founder of DataTrek research. “This tells us inflation will remain an issue for at least several more months.”
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