Fed Officials Say Rising Supply Chain Risks Fuel Concern of More Persistent Inflation

Federal Reserve officials said on Wednesday, May 6, 2026, that the ongoing U.S.-backed war with Iran is raising the risk of a sustained inflation shock, with continued high oil prices and developing concerns about global supply chain pressures.
According to Chicago Fed President Austan Goolsbee, business executives indicated that a short-term rise in oil prices following the start of the Middle East conflict on February 28 would be manageable. However, they warned that sustained high oil prices would place significant pressure on supply chains, echoing the supply-chain disruptions that contributed to the inflation surge during the COVID-19 pandemic.
Goolsbee noted that those supply-chain pressures are already beginning to emerge as the war continues. Businesses are drawing down existing inventories of industrial chemicals and other inputs whose distribution has been disrupted. At the same time, sustained high fuel prices are increasing shipping and related costs, adding further pressure to production and distribution expenses.
Notably, a New York Fed measure of global supply chain pressure jumped to its highest level since July of 2022, when manufacturing chains were still snarled from the pandemic and the world faced a broad surge in prices. This suggests that inflation pressures are moving beyond the impact ‌of tariffs and ⁠high oil prices due to the war in the Middle East.
With inflation about a percentage point above the Fed's 2% target and expectations that it may move higher, investors see little chance the U.S. central bank will cut rates for perhaps another year or more. Consequently, the Fed may remain on an extended pause, keeping its policy rate in the 3.50%–3.75% range, where it has been since December 2025, and delaying what had previously been expected to be continued monetary policy easing.
In addition, the Personal Consumption Expenditures Price Index (PCE Price Index) used by ⁠the Fed to set its inflation target, rose to 3.5% in March 2026 from 2.8% in the prior month. Meanwhile, core inflation, which excludes volatile items such as energy, rose to 3.2% from 3.0% in February 2026. Similarly, the Consumer Price Index (CPI) for April 2026, due next week, is expected to show a further acceleration.

(Source: Reuters)