- Monetary policy is effective at combating cyclical shortfalls - such as market instability following financial crises - but ineffective against structural shifts.
- After acting as “global inflation dampeners” for nearly two decades, China’s producers faced a perfect storm of margin compression amid concurrent supply bottlenecks and demand rebound in the first half of 2021.
- The Fed could change course and treat pass-through inflation pressure from China as “structural” in nature and determine that it does not warrant a policy shift.
For further details see:
The Fed's Blindspot On Global Inflation Drivers