Fed Chair Blames Supply Chain Issues for Inflation: ‘Supply-Side Constraints Have Gotten Worse’

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Federal Reserve Chairman Jerome Powell presented a bleak outlook for American economic woes on Friday, suggesting supply-chain problems were behind rising inflation.

“Supply-side constraints have gotten worse,” Powell said at a virtual conference hosted by Bloomberg. “The risks are clearly now to longer and more-persistent bottlenecks, and thus to higher inflation.”

As of August, the price of goods excluding food and energy had experienced a year-over-year increase of 3.6 percent. Worker shortages have affected have been a catalyst for supply-chain problems Powell referenced, and have prompted warnings from industry. “We have significant concerns with the employer mandates announced on Sept. 9, 2021, and the ability of industry members to implement the required employee vaccinations by Dec. 8, 2021,” Cargo Airline Association Stephen Alterman wrote in a Wednesday letter addressed to the Office of Management and Budget.

Alterman suggested President Joe Biden’s mandate requiring companies to ensure their employees are vaccinated was leading employees to leave their jobs. He asked the OMB to move a deadline for compliance from Dec. 8 to “the first half of 2022.”

The same day Powell made his remarks, billionaire bond investor Jeffrey Gundlach said he believed inflation in consumer prices would remain at 4 percent throughout the next year. “We believe that it’s almost certain that 2021 will end with a 5-handle on the [consumer price index], and it’s going higher in the next couple of readings, thanks primarily to the price of energy,” Gundlach said in an interview with CNBC. “And we don’t think inflation is going below 4 percent anytime in 2022.”

Powell added on Friday Friday the Fed was likely to taper its monthly purchases of $120 billion in Treasury and mortgage debt, an effort to cut back on the rate of inflation, but would unlikely leave interest rates unchanged. “I do think it is time to taper,” Powell said. “I don’t think it is time to raise rates.”