Fed’s Goolsbee warned the Fed cannot ignore repeated, persistent supply shocks
and may need to respond in ways that cause economic pain. He said supply shocks
are occurring more frequently, with greater magnitude and longer duration, and
if they prove persistent the argument for ‘‘ignoring’’ them no longer holds.
Policy responses to supply-driven inflation need not be as aggressive as for
demand overheating, but the adjustment will not be painless, he added, noting
stagflationary shocks force a painful trade-off between employment and inflation
and the only route back may be a hard one.
