John Williams, Speech: Reading the Recovery

Inflation –“There are two main contributors to the current high inflation: very strong demand, especially for goods, and supply bottlenecks. Both have been prevalent throughout the pandemic. The shutdown of factories—particularly those in Asia—and widespread lockdowns led to disruptions to logistics networks, elevated shipping costs, and prolonged delivery times.  Just as the pandemic has followed its own script, I anticipate that the dynamics of inflation will also be different than previous cycles. With growth slowing and supply constraints gradually being resolved, I expect inflation to drop to around 2.5% this year, much closer to the FOMC’s 2% longer-run goal. And looking further ahead, I expect inflation to get close to 2% in 2023.”