Latest news with #supplyshocks
Zawya
11-08-2025
- Business
- Zawya
Qatar's QNB expects deflation to dominate future macro trends
Doha: Qatar National Bank (QNB) group said that secular deflationary forces, particularly from technological progress, automation, and the digitization of services, are expected to remain dominant over the long term, but they are increasingly being punctuated by short, sharp episodes of inflation driven by supply shocks associated with geopolitical tensions, green transition costs, and policy uncertainty. In it weekly commentary, QNB pointed that global economy is no longer anchored in a stable inflationary or deflationary regime, but rather navigating a new era marked by structural volatility. According to QNB, prices changes of key baskets of goods and services are some of the most closely watched metrics in macroeconomics, alongside economic growth. They are crucial indicators of economic health, affecting everything from purchasing power and household confidence to investment decisions and monetary policy. While some level of price appreciation (inflation) is a normal and even desirable feature of a growing economy, both excessive inflation and outright price declines (deflation) can cause significant distortions and long-lasting damage, QNB said. Moderate inflation, like the one observed during the period of the so-called Great Moderation (1990-2007) in most advanced economies, typically reflects a vibrant economy that delivers well balanced growth. However, when inflation becomes excessive and persistent, it erodes real incomes, compresses profit margins, and destabilizes financial markets. It also compels central banks to respond with aggressive policy tightening, which can trigger recessions or financial stress, The Bank added. Conversely, deflation, the sustained decline in the general price level or much lower than normal inflation, is often a symptom of deeper structural weakness, such as depressed demand, financial deleveraging, or demographic stagnation, QNB noted. Falling prices may appear positive on the surface, but they can discourage consumption, delay investment, increase real debt burdens, and trap economies in a vicious cycle of low growth and weak confidence, it added. QNB cited Japan's experience in the 1990s and early 2000s as a cautionary tale of the long-term consequences of entrenched deflation, pointing that the same is also true for other major economies following the Great Financial Crisis in 2007-08. Relatedly, the bank noted, following a period when pandemic-related supply side shocks triggered much higher than normal inflation, there is little consensus on whether inflation or deflation are going to be major driving forces over the medium- or longer-term. The weekly commentary pointed that some analysts highlight that one of the key reasons inflation has re-emerged as a central economic concern lies in the unravelling of several structural forces that underpinned the "Great Moderation." During that time, a confluence of factors helped supress price pressures and stabilize macroeconomic volatility: deepening globalization fostered cheaper imports and offshoring; relative geopolitical stability ensured open trade routes and capital flows; supply chain integration enabled just-in-time production with minimal inventory costs; and the rise of rational, technocratic politicians and government officials who contributed to anchor economic expectations through credible policies and transparency, QNB said. The Covid pandemic exposed the fragility of over-optimized supply chains, prompting a shift toward reshoring and redundancy that carries higher cost structure, it added. Combined with demographic pressures (less people working to sustain more people not working), green transition costs, and strategic competition over critical technologies, these reversals support the argument of some analysts about a more inflation-prone environment ahead, in which price stability can no longer be taken for granted, the bank added. On the other hand, many analysts argue that it would be a mistake to assume that the post-Covid and Ukraine War era is uniformly inflationary. Powerful disinflationary forces are at play and accelerating, particularly those rooted in technological innovation. QNB considered that some geopolitical developments commonly viewed as inflationary - such as trade fragmentation - may actually have deflationary consequences under certain conditions. © Dar Al Sharq Press, Printing and Distribution. All Rights Reserved. Provided by SyndiGate Media Inc. (
News.com.au
15-05-2025
- Business
- News.com.au
Fed Chair Powell Discusses Direction of Policy-Setting Framework
Federal Reserve Chair Jerome Powell said the economy may be entering a period of 'more frequent' supply shocks.
CBS News
15-05-2025
- Business
- CBS News
Fed Chief Jerome Powell warns that U.S. could face "supply shocks"
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. The federal funds rate currently sits at 4.25% to 4.50%. The Fed last week decided to hold that rate steady — a sign it is still weighing the economic risks posed by the Trump administration's tariffs. The central bank is scheduled to meet again in mid-June, where it's expected to maintain its benchmark rate at its current range, according to predictions from CME FedWatch. Inflation volatility Powell also warned that higher real rates could unleash greater inflation volatility than what the U.S. experienced during the "inter-crisis period of the 2010s" — the timespan between the 2008 financial crisis and the 2020 COVID-19 pandemic when the economy was in recovery mode. Inflation eased slightly last month but is still above the Fed's 2% goal. Powell's comments come as the American consumers and businesses continue to grapple with economic uncertainty as a result of the Trump administration's stop-and-go tariff policies. Mr. Trump and his team have been meeting with foreign leaders in recent weeks to negotiate deals before the 90-day pause on reciprocal tariffs lifts in July. On Thursday, during an event with business leaders in Qatar, Mr. Trump said the Indian government has offered to eliminate tariffs on U.S. goods, reported Bloomberg. Recent trade deal announcements with the U.K. and China have heartened the stock market which soared on Monday following the U.S. agreement with China. Still, Wall Street analysts and economists note that high tariffs aren't going away anytime soon. Mary Cunningham Mary Cunningham is a reporter for CBS MoneyWatch. Before joining the business and finance vertical, she worked at "60 Minutes," and CBS News 24/7 as part of the CBS News Associate Program. contributed to this report.
Free Malaysia Today
15-05-2025
- Business
- Free Malaysia Today
US Fed chair warns of potential for ‘more persistent' supply shocks
Federal Reserve chair Jerome Powell said the economic landscape had changed since the last meeting, when interest rates were far lower than they are today. (AP pic) WASHINGTON : Federal Reserve chair Jerome Powell today warned of the possibility of 'more persistent' supply shocks, as US central bankers met for talks against a backdrop of uncertainty kicked up by Donald Trump's tariff rollout. The US president's on-again, off-again approach to tariffs has caused a surge in volatility, with sharp movements in both US and global financial markets. Before a de-escalation this week, steep tariffs on China and retaliatory measures by Beijing also raised fears of potentially major trade disruptions between the two countries. '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 told his colleagues in Washington, according to prepared remarks. In the speech, which came at the start of the Fed's first public strategy review for five years, Powell said the economic landscape had changed since the last meeting, when interest rates were far lower than they are today. The Fed's key lending rate currently sits at between 4.25% and 4.50% as the policymakers look to cool inflation without pushing up unemployment. 'Longer-term interest rates are a good deal higher now, driven largely by real rates given the stability of longer-term inflation expectations,' he said. 'The higher rates could also reflect fears of higher volatility going forward,' he added. While the Fed could make some small changes to its approach to monetary policy, its key long-term inflation target would remain unchanged, Powell told his colleagues. 'Anchored expectations are critical to everything we do, and we remain fully committed to the 2% target today,' he said.
