Powell Says U.S. May Be Entering Period of Frequent "Supply Shocks"

Federal Reserve Chair Jerome Powell said that the U.S. may be entering a period of more frequent supply shocks and volatile inflation, which would require greater transparency from the central bank, Jennifer Sonnenberger reported for Yahoo Finance.

Powell suggested that higher interest rates—adjusted for inflation—could be a sign that markets now anticipate more volatile inflation than during the relatively stable 2010s. I Photo: Federalreserve Flickr

The remarks came during a speech kicking off a five-year review of the Fed's monetary policy framework.

“A critical question is how to foster a broader understanding of the uncertainty that the economy generally faces,” Powell said in Washington, D.C., noting that “we may be entering a period of more frequent, and potentially more persistent, supply shocks.”

That, he warned, would pose “a difficult challenge for the economy and for central banks.”

Powell suggested that higher interest rates—adjusted for inflation—could be a sign that markets now anticipate more volatile inflation than during the relatively stable 2010s.

“In periods with larger, more frequent, or more disparate shocks, effective communication requires that we convey the uncertainty that surrounds our understanding of the economy and the outlook. We will examine ways to improve along that dimension as we move forward,” he said.