In addition to the human devastation from Hurricane Katrina, the storm caused significant damage to the nation’s energy infrastructure in the Gulf of Mexico (GOM) coastal region and affected critical shipping routes. Energy prices spiked substantially higher in the immediate aftermath of the storm as almost all production of oil and natural gas in the GOM coastal region was shut down. The GOM coastal region supplies large fractions of domestic oil and natural gas production. Energy prices have receded from the highs seen earlier this month, but remain elevated, and energy production in the GOM has been gradually coming back on line as the region begins to recover. While it is still too early to assess the longer term macroeconomic effects of Katrina, there will likely be short-term declines in national employment and growth in the gross domestic product (GDP), upward pressure on inflation, and a possible pause by the Federal Reserve from its policy of steadily increasing short-term interest rates.