Fed chief Jerome Powell warns that U.S. could face "supply shocks"

[BumRushDaShow]

Source: CBS News

Updated on: May 15, 2025 / 2:07 PM EDT


Federal Reserve Chair Jerome Powell is cautioning that the U.S. could face an increase in supply shocks. The comes a week after the central bank announced it would hold interest rates steady amid a period of economic uncertainty.

"We may be entering a period of more frequent, and potentially more persistent, supply shocks — a difficult challenge for the economy and for central banks," Powell said Thursday at research conference in Washington, D.C., where U.S. bankers are meeting to discuss monetary policy.

Analysts have also warned that U.S. companies could face inventory shortfalls as a result of tariff-induced supply chain issues. Container bookings from China to the U.S. dropped as much as 60% following the pre-tariff spike in imports according to Flexport, a supply chain management company.

Powell acknowledged at the conference that the economic environment has changed since the Fed's last strategy meeting in 2020, when interest rates were far lower than they are today. "Longer-term interest rates are a good deal higher now, driven largely by real rates given the stability of longer-term inflation expectations," Powell said on Thursday, referring to interest rates adjust for inflation.

Read more: https://www.cbsnews.com/news/fed-powell-trump-tariffs-supply-shocks-2025/

[Bernardo de La Paz]

1. Supply shocks are different from overproduction or increased demand

Overproduction, often from declining demand, leads to declining prices and cutbacks in production: hence lower interest rates.

Increased demand leads to inflation as more dollars chase scarcer goods, hence higher interest rates.

Supply shocks, like the oil shocks of '73 and '79, lead to inflation due to less supply. But at the same time supply problems put people out of work. Hence stagflation.

The genius of the stable who continually fails Econ Reality 101 has engineered all by himself the stage for a stagflation drama and he can't figure it out. His sycophants compete for attention and confound his confusion.

[hedda_foil]

2. Oh mah goodness, said she, fanning herself ... who evah would have expected such deprivations?

[hedda_foil]

2. Oh mah goodness, said she, fanning herself ... who evah would have expected such deprivations?