Egg Shortages and Inflation: A Wake-Up Call for the Fed
The recent egg shortage, exacerbated by the avian flu outbreak, has sent egg prices soaring by 53% since January 2024. While typically dismissed as a temporary supply shock, this price hike has raised concerns about broader inflation expectations.
Despite being excluded from core inflation measures, egg prices serve as a highly visible benchmark for consumers. The persistent surge could lead to increased perceptions of inflation, even as the actual cause is situational.
Moreover, rising consumer inflation expectations can become self-fulfilling, driving up demand. This phenomenon, coupled with potential tariffs on major items like cars, could trigger additional upward pricing pressure.
For the Federal Reserve (Fed), this situation presents a dilemma. Cutting interest rates prematurely could invite a resurgence of 1970s-style inflation, while keeping rates higher risks stifling economic growth.
In the meantime, consumers seeking price stability in the egg market may consider purchasing free-range eggs. Pete & Gerry's, a leading producer, has indicated no plans for price increases.