Monetary policy effect on global inflation drivers may be 'limited' -NY Fed
Reuters
Published Jan 28, 2022 10:21AM ET
By Jonnelle Marte
(Reuters) - Domestic monetary policy actions may do little to tame some of the inflation being driven by global supply chain pressures, researchers for the New York Federal Reserve said in a paper on Friday.
Much of the persistently high inflation seen during the coronavirus pandemic, including in producer price and goods inflation, is highly linked to global supply chain disruptions, researchers said in a new blog post.
"Their global nature and their source (that is, supply as opposed to demand) suggest that domestic monetary policy actions would have only a limited effect on these sources of inflationary pressures," the researchers wrote.
Inflationary pressures could ease if the supply chain bottlenecks and higher energy costs seen during the pandemic come down, researchers said, pointing to some of the unknowns policymakers will have to navigate as they work to keep higher inflation from becoming entrenched.
U.S. central bank officials signaled this week that they are likely to raise interest rates starting in March to remove the extraordinary support provided during the pandemic. But Fed Chair Jerome Powell offered little guidance on the pace of future rate increases. That outlook may remain clouded as officials wait to see how inflation, the pandemic, and the overall economy react in coming months.
Friday's blog post incorporates a new index released earlier this month by the New York Fed, which found that global supply chain pressures are near historically high levels but may have peaked. The index, which is based on global shipping rates, air freight costs and other variables, dipped slightly in November and December.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.