The supply shock from the war in the Middle East is the second negative supply shock in a year, coming on the heels of sharp boosts in tariffs in April 2025. Negative supply shocks have the effects of pushing up prices while holding down output and employment. Moreover, both shocks have come at a time … Continue reading The Policy Challenge Ahead: Any Easy Way Out?
Are Supply Shocks the Only Thing Holding Up Inflation?
Policymakers and analysts are emphasizing that another supply shock—a surge in oil prices—is about to hit measures of consumer inflation at a time when the full impact of the last supply shock—higher tariffs—has yet to be realized. As a result, the time required before the Fed hits its 2 percent target for PCE inflation might … Continue reading Are Supply Shocks the Only Thing Holding Up Inflation?
Thomas D. Simpson, PH.D. 