Inflation climbs at fastest pace in 30 years as supply chain persists

It is “frustrating to see bottlenecks and supply chain problems not improving – in fact, at the margin, apparently getting a little worse,” said Jerome H. Powell, president of the Fed, at a conference Wednesday. “We see this probably continuing next year and maintaining inflation longer than we expected.”

Phil Levy, chief economist at logistics company Flexport, said his company expected supply chain problems to start easing no earlier than next summer. But as labor issues are bubbling up in long overloaded ports this could take even longer.

And in the short term, difficulties finding a shipping space could translate into a shortage of toys and trinkets during the holiday season, forcing companies to raise prices to ensure their supply lasts, Mr. Levy.

“The ports are under pressure, with ships saved. We are short of truckers. We have warehouses packed, ”he said, adding later:“ A year ago there was a feeling that this would be a short-lived thing – there would be a craze, a squeeze, then it would stop. The interpretation of “transient” has changed.

While central bankers have long expected price gains to slow down, their assumptions about how quickly that moderation will occur are growing gloomy. In their latest economic projections, Fed officials predict that the personal consumption expenditure index on average 4.2 percent in the last quarter of 2021 – down from 3.4% in their June estimates – before falling back to 2.2% by the end of next year.

The Fed is aiming for inflation of 2% on average over time, although it is happy to tolerate higher periods until they are expected to last.

Today’s price problem is surprising. Central bankers in advanced economies have spent most of the past decade fighting inflation that is too low rather than too high. This is one of the reasons officials expect the price gains to cool – once the pandemic shock has passed, long-term forces like an aging population and technology are expected to dominate. .

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