FRANKFURT, Germany—Acute bottlenecks in supply are driving inflation and holding back the recovery from the coronavirus pandemic, the heads of several major central banks said on Wednesday.
The uncertainty around supply issues was a “threat to growth,” President of the European Central Bank Christine Lagarde said at the close of the Frankfurt institution’s annual forum.
“How long those bottlenecks will take to be resolved and to fade out remains to be seen,” Lagarde said.
She was joined virtually on the closing panel by the Chair of the US Federal Reserve Jerome Powell who said bottlenecks were “holding inflation up” longer than expected.
Prices rose at a rapid 4.2 percent pace in July, on the Fed’s preferred inflation measure, the personal consumption expenditures (PCE) price index, far above its two percent goal.
Shortages in raw materials and key components which have affected companies worldwide were “not getting better” Powell said, and could continue to have an effect into next year, although the Fed’s expectations for growth remain “strong.”
Missing supplies were “really holding back the economy,” said the Governor of the Bank of England Andrew Bailey, and the challenge for the coming months was to “get through this period of uneven growth” caused by shortfalls.
The shortages did not have a “common cause,” Bailey said, and could not all be solved by changes to central bank policy.
In the UK, a lack of lorry drivers linked to the country’s exit from the EU has caused scarcities of fuel and food, leading to queues at petrol stations and empty supermarket shelves.
Meanwhile, a global lack of semiconductors, a key component in cars and consumer electrical goods, has been exacerbated by coronavirus lockdowns at key points in the supply chain.