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Energy's impact on inflation expectations

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Abstract

Some closely watched measures of inflation expectations have been in gradual decline over the past five years. Over the same time, oil prices have fallen dramatically. Although the movements in energy prices are normally considered temporary, they appear to have played a large role in pushing down some longer-term forecasts for consumer price index inflation from professional forecasters. Analysis shows the drop in energy prices can explain about three-fourths of the decline in these professional inflation forecasts over the past five years.

Suggested Citation

  • Yifan Cao & Adam Hale Shapiro, 2016. "Energy's impact on inflation expectations," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfel:00097
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    Cited by:

    1. Òscar Jordà & Fernanda Nechio, 2020. "Inflation Globally," Central Banking, Analysis, and Economic Policies Book Series, in: Gonzalo Castex & Jordi Galí & Diego Saravia (ed.),Changing Inflation Dynamics,Evolving Monetary Policy, edition 1, volume 27, chapter 8, pages 269-316, Central Bank of Chile.
    2. Hammoudeh, Shawkat & Reboredo, Juan C., 2018. "Oil price dynamics and market-based inflation expectations," Energy Economics, Elsevier, vol. 75(C), pages 484-491.
    3. Berge, Travis J., 2018. "Understanding survey-based inflation expectations," International Journal of Forecasting, Elsevier, vol. 34(4), pages 788-801.

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