Central bankers will try to look through supply shocks. That may be right when it comes to energy, but it is not right when the supply shock is in food.
Adverse shocks to supply tend to lift inflation and lower growth.
The FED is in a quandary as it parses the likely effect of punitive US tariffs. The tariffs act as a negative supply shock that lowers growth and lifts inflation.
US tariffs leave the Fed – and the bond market – in a quandary. They act like a supply shock, producing lower growth and higher inflation. The question is which will...
There are some reasons why the risk of a policy mistake is extraordinarily high amongst developed-country central banks.
Advanced country central banks are stepping up the pace of tightening to control runaway inflation. Higher rates weaken demand, but it is not excessive demand that is...
It does matter whether it is a demand or supply shock that is creating the inflationary pressure.
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