Lates News

"Fed Whisperer" Nick Timiraos: I believe the Federal Reserve's response to the inflationary effects of rising oil prices should to some extent depend on the starting point of the economy. If inflation has recently been at the lower end of the desired range and existing evidence suggests that inflation expectations are also low and firmly anchored, then the urgency of addressing the inflation threat posed by rising oil prices is lower. In this case, monetary policy does not need to tighten, and may even be moderately accommodative after the oil price shock. However, if inflation is already close to the upper limit of the acceptable range and policymakers believe there is a significant risk of further increases in inflation and its expectations, then stronger action in the form of tighter monetary policy is likely necessary. By guiding policy towards stabilizing the public's inflation expectations, the Federal Reserve will make important investments in future economic stability.