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Could Inflation Prompt Powell to Act Like Volcker?

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The war in Ukraine threatens to keep costs elevated for longer. Gas prices have already surged, lifting headline inflation as consumers pay more at the pump. Disruptions to supply chains — and shortages in Russian and Ukrainian exports like neon, palladium and wheat — could curtail car and food production and the transport of goods, exacerbating global shortages.Now, fresh virus restrictions in Shanghai and Shenzhen, China, a major technology manufacturing hub and port city, is boosting the risk that supply chains remain roiled in the coming months. Those shocks from outside come at a time when price pressures had already begun broadening to categories like rent, another development that could make inflation last.It is not clear whether those factors will keep inflation drastically higher, but Fed officials will be watching warily.If the Fed has to raise interest rates to painful levels to cool off the economy and put a lid on prices, it could send financia …

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