By Howard Schneider
NASHVILLE, Tennessee- The COVID-19 pandemic’s crushing blow to global supply chains also scarred US Federal Reserve officials who thought the fallout from disrupted ports and backed up container ships would cause only “transitory” inflation.
A strike by dockworkers on the US East Coast and Gulf Coast that began on Tuesday isn’t expected to cause problems as deep or severe, but it still could cloud Fed policymakers’ views and their sense of certainty about what’s happening in the economy as they debate their next interest rate move ahead of the US central bank’s Nov. 6-7 policy meeting.
“If it is short enough we will get through it,” David Altig, executive vice president and chief economic adviser at the Atlanta Fed, said on Sunday at a National Association for Business Economics conference in Nashville, Tennessee.
But he noted that one of the things helping hold inflation down right now is falling prices for goods, which could be at risk if the flow of imports stops for too long during the dockworkers’ strike.
“A reversal of those durable goods dynamics in terms of prices would not be a good thing, to say the least,” for central bankers counting on weak goods prices to keep overall inflation anchored, Altig said.
Ports from Maine to Texas were shuttered after the International Longshoremen’s Association called its first strike since 1977, putting thousands of workers on the picket line and stranding ships and containers at facilities central to the global economy. Many analysts expect the labor action to be short-lived, if only because the impact on commerce could be severe, putting pressure on both sides to reach agreement or, alternatively, for the White House to intervene. – Reuters