Energy Shocks, Sticky Inflation, and the Federal Reserve’s New Dilemma
A blockade of key global shipping routes has converted what began as a regional conflict into a structural disruption for global energy trade, cutting off oil and liquefied natural gas supplies in ways that are pushing inflation higher and forcing central banks into a defensive posture that the earlier part of this year’s consensus did not anticipate. This is not a short-term problem awaiting diplomatic resolution. It is a supply shock that operates through two distinct mechanisms: direct increases in fuel costs and secondary transmission into manufactured goods, food, and services. The second mechanism is the one that keeps inflation elevated long after the initial price spike has received its headlines.