Federal Reserve Chairman Jerome Powell said Wednesday that he expects the supply chain confusion that has led to a shortage of basic manufacturing materials and helped lift inflation to a 30-year high on Wednesday, but the timing of a fix remains “highly uncertain.”
Powell made the announcement in a speech (pdf) following the conclusion of a two-day Fed meeting on Nov. 3, at which the central bank left interest rates unchanged but voted to roll back massive central bank bonds. purchase program.
“Our tools cannot ease supply constraints,” Powell said, referring to the Fed’s monetary policy arsenal, which has been fully deployed to help lift the economy out of pandemic lows, but which is increasingly at odds with runaway inflation.
Powell added that Fed policymakers “continue to believe that our dynamic economy will adjust to the imbalance in supply and demand, and that inflation will fall to levels much closer to our long-term goal of 2 percent.” His remark came at a time when inflation was heating up and the Fed’s preferred inflation indicator – the so-called core price index PCE – has been stuck at 3.6 percent year-on-year for the past four straight months, the highest in 30 years.
“Of course, it is very difficult to predict whether the supply constraints will persist or their impact on inflation,” Powell said. “Global supply chains are complex; they will return to normal operation, but the timing is very uncertain. “
Chief financial analyst at bank rates, Greg McBride, told The Epoch Times in an e-mail statement that Powell’s comments about the Fed’s failure to fix supply-side problems indicated a weak desire for a faster rate hike.
“The Fed’s statement focused quite a bit of ink on the supply chain constraints and imbalances between supply and demand that have driven prices so skyrocketing,” McBride said. “This is important because the problem of supply is not something that will be solved by raising interest rates, but something that will definitely affect the decline in demand. This could soften the expectations of a rate hike in the second half of 2022 a little. ”
Meanwhile, Tim Huxley, chief executive officer of Hong Kong-based Mandarin Shipping, told CNBC Asia Street Signs earlier this week that he believes global supply chains will take “quite a long time” to normalize before they do. do, the riots will continue to push consumer prices up.
“Every sector that participates in this particular combination of black swan events should really try to solve their specific problems,” Huxley told the publication, adding that the shipping industry is responding by expanding its fleet, but noted that most of the new capacity will not arrive until 2023. …
Huxley said additional investment in ports, roads and bridges would help ease the supply crisis, but it could take years before it has an impact.
“All of these problems remain here for a long time,” Huxley said, adding that this will lead to higher consumer prices and lead to shortages of some goods.
According to ARM Holdings, a leading semiconductor developer based in Cambridge, England, the chip shortage that is hampering the automotive and tech industries will persist until the end of 2022.
“Where will we be next Christmas? I am waiting [these] supply chain constraints need to be improved slightly, but this will not be completely eliminated, ”said Simon Segars, CEO of ARM Holdings, at a web summit in Lisbon, AFP reported. “This is not a short term problem with a short term solution.”