UEDA: We have already seen supply shocks in food and energy; even if each is a price-level shock, the large number of such shocks could raise average inf.

The Richmond Fed's U.S. Services Revenue Index rose to +14 in May from +9, indicating business revenue growth reached its fastest pace since Dec 2024. The Richmond Fed Manufacturing Index registered 13 in May, the highest reading since Nov 2021. Considering the Iran war remains ongoing and other service‑sector surveys so far this month have been relatively muted, these Richmond Fed readings are notably strong.

ECB chief economist LANE said on Thursday that even if the Middle East conflict is resolved quickly, the resulting energy shock could have a lasting impact on inf. While oil prices have historically fallen back to prior levels after a sharp spike, the current episode may differ because countries are rebuilding inventories or adjusting energy mixes, leaving energy costs elevated. LANE said: "Global oil supply fell quite rapidly and sharply overnight, a gap that had previously been masked by inventories. Even if the initial energy shock begins to fade, second‑round effects will persist for some time." He added that policy lessons from past energy shocks include that rising energy costs can abruptly push up inf and trigger "various non‑linear" mechanisms that broaden price increases. "But this is different from the non‑linear case four years ago," he said, referring to the Ukraine war, when supply disruptions combined with strong demand from the post‑COVID restart to lift inf. LANE said central banks must acknowledge any major shock and its potential impact on inf, but should avoid overreacting when setting monetary policy.