By Yasin Ebrahim

Investing.com —  The red-hot pace of inflation showed no sign of abating, spurred on price spikes in energy, metals and agricultural commodities following the Russian invasion of Ukraine and recent Covid-19 lockdowns in China that have worsened supply chain disruptions, according to the Federal Reserve’s Beige Book released Wednesday.

“Inflationary pressures remained strong since the last report, with firms continuing to pass swiftly rising input costs through to customers,” the Fed said in its Beige Book economic report, based on anecdotal information collected by the Fed’s 12 reserve banks through April 11. 

The report stated that the above-trend inflation had prompted an increase in economic activity at a moderate pace from mid-February.

However, firms have managed to transfer rising input costs onto consumers who “accelerated” spending after Covid-19 cases dropped across the country.

The report also highlighted an “overall insufficient number of workers” as a sign of tight labor markets. It was one factor that is keeping the market from hiring more and increasing inflation. 

Last week’s data showed that U.S. Inflation rose at the fastest rate since 1981. It increased 8.5% over the twelve months to March.

According to the report, “Firms also reported that rising inflation was contributing to increased wages and that these higher wages did little to reduce widespread job vacancies. However, some contacts indicated that there were early indications that wage growth was slowing,” the report revealed.

Many fear the ongoing rise in wage pressures will keep inflation above the Fed’s 2% target for a prolonged period, and force the central bank to turn even more hawkish on its plan to tighten monetary policy.     

“The Fed has primed markets for a +50bp hike in May, and pricing has obliged, with futures placing a 98.1% probability of a +50bp rise, along with +246bps of tightening for the entire year,” Deutsche Bank said in a note.