The global finance officials gathered in Washington on Wednesday focused on finding a way to reduce supply chain bottlenecks that are driving prices higher and threatening to derail the economic recovery.
As demand has increased suppliers have not been able to keep up: Ships are lined in American ports waiting to offload goods, US consumer inflation remained elevated in September, global oil prices have jumped over $80 a barrel the highest in years and British families may be forced to cut turkeys for Christmas dinner.
The developing global supply challenges are a key focus of the meetings of the International Monetary Fund, the Group of 20 advanced economies and the smaller gathering of finance ministers from the Group of Seven.
Pandemic restrictions shuttered manufacturing and trading routes while suppliers, who are facing shortages of workers and truck drivers, have not been able to keep up with sudden surge in demand for goods as economies began to reopen.
The disruptions, which some policymakers fear may be long lasting, have hobbled the recovery momentum, prompting the IMF to cut growth forecasts for major economies like the United States and Germany.
G7 officials agreed to work together to monitor the difficulties.
Supply chain challenges are being felt globally - and finance leaders from around the globe must collaborate to address our shared challenges, says the UK Chancellor of the Exchequer Rishi Sunak, who chaired the meeting of the world's richest nations.
The World Bank estimates that 8.5 percent of global container shipping is stalled in ports, twice as much as in January.
Ignazio Visco, the Central Banker of Italy, agreed with IMF and others who have said that the inflation pressures are mostly due to short-term factors like the surge in demand and the supply issues.
He acknowledged that such may take months before they fade away. G 20 central bankers are studying the issue to see if there are more structural factors at work in the bigger-than-expected inflation spike and whether there is some component. that could become permanent, Visco told reporters.
Central bankers are walking a fine line between warding off easy inflation and supporting the recovery with permanent conditions while supporting quick inflation.
The G-20 communique said central banks will act as necessary to address price stability while looking at inflation pressures where they are transitory. But World Bank president David Malpass said that some of the price spikes will not be transitory. It will take time and collaboration of policymakers across the world to sort them out. IMF chief Kristalina Georgieva said the lag in vaccination rates to contain pandemic in developing nations is contributing to supply constraints, and as long as it expands, this risk of interruptions in global supply chains will be higher. In the world's largest economy, Joe Biden announced an initiative to combat backlog by pushing for 24 hour service at ports and suppliers.
However, Biden said the policies must be crafted to reduce reliance on domestic sources and boost domestic production to avoid such supply shocks.
Never again should our country and economy be unable to make critical products we need because we don't have access to materials we want, Biden said. Never again shall we have to rely on one company or one country. That theme was echoed by French Finance Minister Bruno Le Maire, who told reporters on sidelines of the meeting: The answer lies in one word: independence.