Source: Jin10 Data

The heavy blow to the global supply chain caused by the COVID-19 pandemic also shocked officials at the Federal Reserve, who originally thought that the blocked ports and backlog of container ships would lead to a 'temporary' inflation.

The strike by dockworkers on the East Coast of the United States and along the Gulf of Mexico coast starting on Tuesday is not expected to cause such serious or severe problems, but as discussions on the next interest rate move before the Federal Reserve's policy meeting on November 6th to 7th, the strike could still affect the views of Federal Reserve policymakers and their certainty about the economic situation.

David Altig, Executive Vice President and Chief Economist at the Federal Reserve Bank of Atlanta, said last Sunday at the National Association for Business Economics conference in Nashville, Tennessee, 'If time is short enough, we will get through this difficulty.'

However, he pointed out that one factor currently helping to suppress inflation is the decrease in commodity prices, and if the strike by dockworkers leads to import delays for too long, this trend could be threatened.

Altig said that for central bank officials who rely on soft commodity prices to stabilize overall inflation, 'a reversal in the trend of durable goods prices is at least not a good thing.'

Following the first strike by the International Longshoremen's Association in the United States since 1977, ports from Maine to Texas were closed, with thousands of workers taking to the streets to protest, and ships and containers stranded in facilities crucial to the global economy. Many analysts expect this labor action to be short-lived simply because the impact on business could be severe, leading to pressure for both sides to reach an agreement or White House intervention.

The issues pointed out by AltiGe may take some time to become so obvious that they could derail the Fed from its efforts to bring inflation back to the 2% target, while officials believe that this struggle is nearing victory. Many businesses, especially retailers preparing for the upcoming holiday season, have increased inventory in advance, with goods on hand to meet demand.

Even a two-week strike could cover the days when government officials conduct the October US employment report survey, potentially distorting one of the last important pieces of information received by Fed policymakers before the November meeting. If companies related to the ports lay off workers, it could depress wage employment numbers and raise the unemployment rate, even though striking workers themselves are not counted as unemployed.

From a macroeconomic perspective, Julia Coronado, President of the company, said during the NABE conference break, "This is complicated for the Fed, with no clear policy implications. It could be as disruptive as damaging demand and inflation, hitting economic growth and consumer spending, while also putting upward pressure on prices."

For the November policy meeting and the likelihood of the Fed cutting interest rates by at least 25 basis points in the days following the election, it may be irrelevant.

Erin McLaughlin, Senior Economist at the Economic, Strategic, and Financial (ESF) Center of World Large Enterprises Federation, said, "But if the strike continues in early November, we may feel the constraints. During the pandemic, we've all learned a lot about supply chains. Ordinary consumers are now aware of this." She is concerned that if the strike continues, consumers may become more cautious.

Former Cleveland Fed President Mester said in an interview at the NABE conference, 'If it ends within a normal timeframe, will it change policy? I doubt it,' 'But you have to consider this. If the strike lasts for a long time, it will definitely have an impact on prices. If people can't get goods or economic activities stop, it could affect the labor market.'

Editor / jayden