Inflation kept high by supply bottlenecks

Inflation shows no signs of backing down in the U.S.

Data released Friday showed producer prices, which measures the costs American businesses pay for supplies and services, surged 8.3 percent through August, in the biggest annual gain in nearly 11 years.

The report suggests that high inflation is here to stay for the time being as supply chains feel the strain from shortages brought on by the health crisis.

Producers are passing on those higher prices to consumers and that is leading to an erosion in consumer buying power, contributing to a downgrade of growth expectations for the third quarter.

Although prices remain high, there was a slight moderation on a month-to-month basis.

The PPI rose 0.7 percent last month - breaking a two-month string of 1.0 percent gains.

But inflation readings in the U.S. continue to defy economists' expectations.

The Federal Reserve has agreed to let inflation run hot for the time being in the belief that prices will calm down as manufacturing capacity catches up to the demand spurt caused by the reopening.

The Fed is also willing to wait in order to give the economic benefits of the recovery time to spread to the lower rungs of the population.

But pressure has been mounting for the Fed to begin letting some of the air out of inflation by pulling back on its massive bond-buying program put in place to help steer the economy through the early days of the health crisis.

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