A major issue currently facing central bank governors worldwide: global supply chain disruptions
Editor's note: Federal Reserve Chair Powell, at the Jackson Hole central banking conference on Friday (August 27), indicated that the Fed might begin tapering its bond-buying program this year. However, his wording left open the possibility that it might not happen, and interest rate hikes are not yet on the table. In his speech, Powell mentioned that the significant rise in inflation is only a temporary phenomenon; employment momentum is strong but could improve further; the Delta variant may or may not impact economic recovery. Additionally, he did not answer investors' most pressing questions: when exactly will the Fed start tapering? How long will tapering last?
The stock market clearly welcomed Powell's remarks, interpreting that the Fed would not soon stop implementing measures to support economic growth. The Dow closed up 0.7%, the S&P 500 gained 0.9%, and the Nasdaq rose 1.2%, with both the S&P 500 and Nasdaq hitting new highs. Barron's noted that while the Fed reiterated that inflation is only temporary, the reality may be more severe. Meanwhile, amid a resurgence of the pandemic, central banks around the world face the dilemma of whether to fight inflation or protect growth. From the current situation, it appears central banks clearly prioritize the latter.
Global supply chain disruptions perfectly illustrate a major challenge currently facing central bank governors. Closures of container ports in China, semiconductor shortages, extreme weather, and truck driver shortages due to Brexit are all factors contributing to...