The bottleneck from the supply chain has huge inflationary implications
The bottleneck from the supply chain whether it be at the ports, or in getting goods from point A to point B, is having huge inflationary implications that could impact inflation expectations going forward. The Fed and other central banks have said that they can tolerate temporary inflation, but if inflation expectations start to move higher and become more entrenched, is the point when they will be forced to tighten policy much quicker.
The White House is saying that:
- Pres. Biden will announce steps on stockpiles to ease supply chain issues
- Expecting solid outcomes from meeting on supply chain
- Says he hopes to agree to set of principles with other countries improving supply chains.
The implications from the Covid economy have been huge and the economies around the world have been forced to deal with the implications from the higher costs. How those problems are solved, or not solved will be key to monetary policy. The Federal Reserve and the ECB still think that inflation will come back down. However it's not so cut and dry and certainly not playing out as expected just a few months ago.
