FRANKFURT- Supply constraints thwarting global economic growth could still get worse, keeping inflation elevated longer, even if the current spike in prices is still likely to remain temporary, the world’s top central bankers warned on Wednesday.
The disruptions to the global economy during the pandemic have upset supply chains across continents, leaving the world short of a plethora of goods and services from car parts and microchips to container vessels that transport goods across the seas.
“It’s … frustrating to see the bottlenecks and supply chain problems not getting better, in fact at the margin apparently getting a little bit worse,” Federal Reserve Chair Jerome Powell told a conference.
“We see that continuing into next year probably and holding inflation up longer than we had thought,” Powell told the European Central Bank’s Forum on Central Banking.
Speaking alongside Powell, ECB chief Christine Lagarde voiced similar concerns, arguing that the end of these bottlenecks, once thought by economists to be just weeks away, is uncertain.
“The supply bottlenecks and the disruption of supply chains, which we have been experiencing for a few months … seem to be continuing and in some sectors accelerating,” Lagarde said. “I’m thinking here about shipping, cargo handling and things like that.”
Global inflation has spiked in recent months on a surge in energy prices, and the production bottlenecks are pushing prices even higher, raising fears that the runup, if it lasts long enough, could seep into expectations and raise the overall profile of inflation.
Indeed, Lagarde said the ECB would be “very attentive” to these second-round effects while Bank of England Governor Andrew Bailey, another speaker at the forum, said he would keep a “very close watch” on inflation expectations. – Reuters
