A series of unfortunate events

Daily update

After the pandemic, the world’s central banks were subject to a series of unfortunate events: supply chain disruption, a war in Ukraine, profit-led inflation, tariffs, and a war in the Gulf. These one-off events raised inflation, but (bar profit-led inflation) were beyond central bank control. But, when such events become a series, should central banks create deflation elsewhere to offset “one-off” events elsewhere?
The US central bank faces a dilemma. Both policy options are mistakes, but which is the lesser evil? Raising rates has no effect on inflation (mainly oil). But the gesture hurts indebted consumers and companies, undermining their ability to manage future economic shocks. Unchanged rates, when Federal Reserve Chair Warsh has not guided market expectations, raise the specter of the “sock puppet” and a loss of credibility. Alongside US Treasury Secretary “House” Bessent, whose credibility has floundered, that is a high risk. On balance, a rate hike is probably the lesser of the two evils, even if unwarranted.
UK August consumer price inflation data was broadly as expected (perhaps slightly more modest in the underlying detail). Producer prices were higher than expected due to the direct and indirect effects of oil.
US August retail sales should show consumers cutting savings to spend. This should continue until Christmas, but is ultimately a finite trend.