Four of the world’s leading central bankers have warned that supply bottlenecks are likely to last longer than expected, saying they are waiting for more unrealized signs that they are causing a self-fulfilling cycle of higher expected inflation and wage increases.
Jay Powell, chairman of the US Federal Reserve, said it was ‘frustrating’ that supply chain bottlenecks were holding back the recovery of the world’s largest economy and helped fuel rising price pressures as it intensified.
“The combination of strong demand for goods and the bottlenecks has led to inflation well above target,” Powell said in a panel with European Central Bank President Christine Lagarde and Andrew Bailey, governor of the European Central Bank. Bank of England and Haruhiko Kuroda, Governor of the Bank of Japan. . “We expect it to continue in the coming months before it moderates as the bottlenecks are eased.”
His warnings reflect similar remarks from Lagarde, Bailey and Kuroda, highlighting the uncertainties that still cloud the economic outlook due to supply-side disruption and the more contagious Delta variant.
Lagarde said supply bottlenecks appear to be accelerating in some areas, such as cargo containers and semiconductors. She added: ‘How long will these bottlenecks take to disappear is a question that we monitor very closely, and that is on our radar screen.
The British shortage of fuel, which has caused some people to be unable to fill their cars with petrol, is showing signs of relief, Bailey said, adding that ending Britain’s timetable this week could help the labor market shortage. But he said economic output in the UK could only return to a pre-pandemic level early next year – “a few months later” than expected.
As the world economy recovered from the impact of the coronavirus pandemic, inflation rose faster than many central bankers expected, driven by rising energy prices, rising demand, delays in the delivery of goods and shortages of materials and products.
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