Commodity Prices and Inflation Expectations in the United States

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Price:  $18.00

Author/Editor: Oya Celasun, Roxana Mihet, Lev Ratnovski
Release Date: © March, 2012
ISBN : 978-1-47550-263-3
Stock #: WPIEA2012089
Stock Status: On back-order

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U.S. monetary policy can remain extraordinarily accommodative only if longer-term inflation expectations stay well-anchored, including in response to commodity price shocks. We find that oil price shocks have a statistically significant, but economically small impact on longer-term inflation compensation embedded in U.S. Treasury bonds. The estimated effect is larger for the post-crisis period, and robust to controlling for measures of liquidity risk premia. Oil price shocks are also correlated with the variance of longer-term inflation expectations in the University of Michigan Survey of Consumers in the post-crisis period. These results are not attributable to looser monetary policy - oil price increases were associated with expectations of a faster monetary tightening after the crisis. Overall, the findings are consistent with some impact of commodity prices on long-term inflation expectations and/or on inflation rate risk.


Economic policy , Inflation , Monetary policy

More publications in this series: Working Papers

More publications by: Oya Celasun ; Roxana Mihet ; Lev Ratnovski