Turns out Federal Reserve Chairman Jerome Powell doesn’t think there is a quick fix for the semiconductor shortage roiling industries from autos to health care to IT and contributing to record inflation.
"I would not say that I would expect the supply chain issues to be completely worked out by the end of this year, I do not expect them and I have not expected them," he said. "What I would say, and I have been saying is that I expect progress to be made in the second half of this year mainly, progress because we are not making much progress" he said. "Things like the semiconductor issue, they’re going to be quite a long time, I think they’ll go more than through 2023."
Powell’s comments give more visibility into the crisis than policymakers had in December.
Late last year, Powell acknowledged inflation was no longer transitory as the supply chain crisis raged. "Bottlenecks and supply constraints are limiting how quickly production can respond to higher demand in the near term. These problems have been larger and longer-lasting than anticipated, exacerbated by waves of the virus" he said during the December meeting.
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Powell’s view dovetails with that of Ford CEO Jim Farley, who this week gave a sobering assessment of the chip crisis that continues to pinch the industry.
"We're still in the teeth of it," Farley told FOX Business' Grady Trimble. "You know, this has been a lot more persistent than many people have predicted. We're maximizing production of our U.S. production in our most profitable vehicles. That's helping them offset the loss in production. But it's a very persistent problem. I would expect it to last through next year."
General Motors and Toyota have also made production changes due to the chip crunch, and Tesla CEO Elon Musk, during the earnings call Wednesday, discussed the same challenges.
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Vehicle prices are already skyrocketing and the consumer is paying for it. Prices for new cars jumped 11.8% annually in December with the average price hitting a record $47,077 as tracked by Kelley Blue Book. This comes as prices for used cars soared over 31%.
The Commerce Department disclosed in a new report this week that chip inventory has plummeted to less than five days in 2021, from 40 days in 2019, elevating the push for more government spending.
"The semiconductor supply chain remains fragile, and it is essential that Congress pass chips funding as soon as possible," said Secretary of Commerce Gina M. Raimondo.