Chapter 1: What happened to the Francis Scott Key Bridge two years ago?
It is kind of a choose-your-own-economic-misadventure with this war. What are you more worried about, inflation or growth? From American Public Media, this is Marketplace. In Los Angeles, I'm Kai Risdahl. It is Thursday today, the 26th of March. Good as always to have you along, everybody.
The risks of this war come in many forms, as we know, and most of them are being covered in depth elsewhere. But for us, what we're worried about falls into two big buckets, threats to global economic growth and threats to global inflation.
Along those lines, this news item today, a projection from the Organization for Economic Cooperation and Development that says short run global inflation is going to be 1.2 percent higher on average than it would have been had the past three weeks never happened. Also relevant, the OECD didn't, as in did not, raise its forecast for global growth as it was expected to, again, three weeks ago.
Chapter 2: How is the rebuilding of the Key Bridge affecting local commuters?
So, which risk ought we worry about more?
Marketplace's Nova Safo starts us off. Before the war in Iran, the global economy was on a relatively strong footing.
With inflation around the world coming under control and growth going to be pretty decent.
Ishwar Prasad, professor of economics at Cornell, says economies have been benefiting from AI infrastructure spending and lower overall tariff rates in the U.S. after the Supreme Court struck down a bunch of them.
At one level, one could argue that it's good, if good can be used in this context, that the world economy is being hit with a negative shock at a time when it looks somewhat resilient.
That shock, of course, is the effective closure of the Strait of Hormuz. The OECD's figures underscore Prasad's point. It's projecting slightly slower global growth than expected, but still growth at 2.9%. Joseph Gagnon is with the Peterson Institute for International Economics.
I do think that we probably will not get a recession unless oil prices rise further a lot.
And that could happen if there's massive or long-term damage to oil production facilities in the Middle East. Inflation is another story. The OECD forecasts a boost to 4% on average among the world's biggest economies from higher energy prices. Ben May of Oxford Economics says the risk is that those price increases spread elsewhere.
If things like the shortage of fertilizers and the higher energy costs push up things like food prices, but also perhaps the price of some other energy-intensive goods and services.
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Chapter 3: What is the current state of global inflation and economic growth?
The key ingredient in all of this, analysts say, is time. Can the Iran war end soon enough to avoid worse economic damage here and abroad? I'm Novosafo for Marketplace.
Wall Street today. I'm going to give you the taco trade update because that's what seems to be driving markets of every variety. During the session, equities were terrible would be a fair word. But 11 minutes after the closing bell, the president said on his social account that he is and this is a quote.
pausing the period of energy plant destruction by 10 days to Monday, April 6th, 2026 at 8 p.m. Eastern Time. Thank you for your attention to this matter.
Chapter 4: Why does the Federal Reserve overlook energy shocks?
End of quote. He also said the president did that the Iranians had requested that pause. A fact check on that is obviously impossible. Details on the pre-taco session when we do the numbers. A barrel of crude oil today. Let's use the global benchmark, shall we? Brent North Sea up almost 5.5%. You're shy of $108 a barrel.
But whatever the day-to-day change that we are all watching and feeling, best not to expect the Federal Reserve to do too much about it, as Chair Powell said more than once at his press conference last week. It, of course, is kind of standard learning that you look through energy shocks, looking through what we look through the energy inflation. You do look through energy shocks.
So we're going to take a couple of minutes to explain what Powell meant by that little nod to macroeconomic management, because it's important that you understand why the Fed mostly looks through energy shocks. Looks through, by the way, it's economist speak for ignore.
Hi, my name is Brian Blank. I'm an associate professor of finance at Mississippi State University.
My name is Kara McDaniel. I'm a clinical professor of economics at Arizona State University. They are our panel today helping us break down what Powell said and what he meant.
I assume he's meaning that in response to higher prices, it is not going to be appropriate to raise interest rate targets.
We know that usually when inflation starts going up, the Fed starts raising interest rates.
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Chapter 5: What are the implications of rising energy prices on inflation?
See also those rate hikes of 2022 and 2023. However, comma, these are not usual inflation times because the price increases that we have seen so far and most of the price increases yet to come are in energy, which along with food, the Fed usually ignores. The core number is what they want, as in core PCE. You hear me say that all the time.
Core matters because food and energy prices are volatile and really not a good way to predict where overall prices are going to go. Drought in Iowa, for instance, smaller soybean crop, higher prices. The Fed is going to look through that. Same, same for energy prices now going up because of a war. That has resulted in what they're going to call a supply shock.
This is language that economists and people in my profession talk about all the time. But I think. If I went home and talked about it with my family, they would look at me like I had three eyes. Just so we can avoid anybody looking at us like we have three eyes? A supply shock is exactly what it sounds like.
The supply, in this case of oil, moving through the economy is suddenly a lot less than we are used to. And an interest rate increase can't really do much to help that. But, because there is always a but, there is a scenario where the Fed would raise rates in response to everything that's going on right now. They are watching long-term inflation expectations.
If this energy shock leads people thinking prices are going to be higher for longer... That can lead to a cycle where prices keep rising faster. inflation expectations, we talk about this on the program all the time, can be a self-fulfilling prophecy.
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Chapter 6: How is the war in Iran impacting unemployment claims?
So the Fed's challenge is to keep inflation expectations in check, even though people are still feeling all the other supply shocks of the past few years. COVID, the Russian invasion of Ukraine, tariffs, and now war.
After each one, people are starting to think maybe this is just normal. This is how it is. And I think that is part of what they're waiting on. But they're definitely concerned that people are starting to assume that there's another shot coming.
To be clear, inflation expectations aren't showing that yet. If you look at measures of long-term inflation expectations, they're hovering in the neighborhood of 2%. 2.3%, to be precise. That's according to the Federal Reserve Bank of Cleveland, pretty much where the Fed wants it to be.
I think that's what I have learned over the last few years, is that people see higher prices, but their long run still seems to be relatively stable.
And so
I have interpreted that as the Federal Reserve has done a really good job ensuring people that they take this very seriously.
Fed credibility is what that is. Yet another thing that we talk about all the time on this program. Special thanks to Brian Blank at Mississippi State University, Kara McDaniel also at Arizona State. In the very early hours of March 26th, two years ago, a container ship hit the Francis Scott Key Bridge over the port of Baltimore. The bridge collapsed. Six construction workers were killed.
The city and the harbor lost an iconic piece of infrastructure and the region lost a key piece of interstate highway. On an average weekday, more than 38,000 cars and trucks cross the Key Bridge on Interstate 695.
It is being rebuilt, not going to be done, though, until late 2030, fingers crossed, which means that until then, as Marketplace's Stephanie Hughes reports, commuters are going to be feeling it. Before he leaves for his evening shift at the Port of Baltimore, Dave Coslin checks to make sure he's got all the necessary gear.
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Chapter 7: What challenges are humanitarian organizations facing in the Middle East?
He used to take the Key Bridge every day. Now he takes the Baltimore Harbor Tunnel. He and everyone else who used to take the Key Bridge, it seems. Well, here's the traffic start.
Look, we're in this right here.
Shh, shh, shh.
The loss of the bridge means drivers like Coslin are collectively spending an extra 21,000 hours of time in traffic every weekday. That's according to a spring 2024 analysis by the state. Coslin says his commute has gone from a tight 20 to more than an hour on some days.
Of course, you don't like to be late for work because if a ship's coming in, there's four guys, me and three others tie it up. And if you're not there, it makes it hard on the three guys.
Coslin says he's more likely to turn down a shift now if he doesn't feel like dealing with traffic. He's also spending more on gas and on food. He used to go home to eat. Now he's more likely to stay near the port and grab a bite out. He used to get angry when he hit the traffic.
I'm accepting it now. There's nothing I can do about it. I've got to accept it. You know, I've got to deal with it.
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Chapter 8: What insights did Janti Soeripto share about the humanitarian crisis?
Even if Coslin is dealing with the traffic, the state says it knows he's tired of it.
He is part of the reason we're working so hard.
That's Maryland's governor, Wes Moore.
And the reason we're down here making sure this bridge can get rebuilt as fast as possible is because I want to shorten his commute.
It's taking two years longer to build the bridge than originally expected. The state also more than doubled the budget, saying it could cost up to $5.2 billion. The federal government is going to cover the cost. Moore points out both the original timeline and cost estimate were released just days after the collapse, while the state was dealing with an active disaster.
We literally still had bodies in the water where we were searching to make sure we were bringing closure and comfort to these families that lost people.
And a lot of those estimates were based on when that bridge was built in 1975.
Maryland is not rebuilding the Key Bridge of the 1970s. Instead, the state has designed a taller, longer cable state bridge that will be able to accommodate bigger ships underneath.
We've got to not just plan for the present. We have got to prepare for the future and how we think maritime communications, maritime operations, and maritime commerce is going to continue to evolve.
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