Midwestern Drought: Pass-through Effects

I’ve been asked about this several times in recent weeks:

We will see less of an inflationary effect in overall inflation than we did with the oil price shock. Restaurants are already having trouble with customer traffic, so they will have to eat higher costs in margins. The drought will hit prices of fresh vegetables, fruits,  meat and dairy  (livestock eat corn), which means that price increases hit lowest income households disproportionately on staples and force them to trade into less healthy, cheaper alternatives. This type of price increase is a transitory issue, out of the hands of the Federal Reserve.

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