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FRBSF: Oil Prices and Inflation

Posted on October 04, 2008

Do changes in oil prices impact core inflation? That is, do changes in oil prices - which are excluded from core measures - pass through over time and raise prices generally? According to this, the answer is no, at least in the U.S.:Oil Prices and Inflation, by Michele Cavallo, FRBSF Economic Letter: As oil prices have climbed over the last several years, the memory of the 1970s and early 1980s has not been far from the minds of the public or of monetary policymakers. In those earlier episodes, rising oil prices were accompanied by double-digit overall inflation in the U.S. and in several othe...

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