Central bank must act beyond supply shocks, Nick Timiraos notes

Central bank must act beyond supply shocks, Nick Timiraos notes
Fed may act as patience on shocks ends

Nick Timiraos, chief economics correspondent at Wall Street Journal, reports on comments from Chicago Fed President Austan Goolsbee about monetary policy.

Goolsbee stated that the central bank has reached the limit of its ability to simply wait out supply shocks. He noted that higher interest rates will be needed to slow certain sectors of the economy, even if they are not the primary drivers of rising prices. Goolsbee described the resulting adjustment as necessarily painful.

Earlier this year, Nick Timiraos reported that investors were widely expecting the Federal Reserve to raise interest rates for the first time in three years. In a separate article, he noted that Fed governor Chris Waller had shifted toward a holding stance on rates due to changing economic signals. These developments set the stage for current discussions on how long the Fed should maintain higher rates to address persistent supply shocks.

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