Are Rising Gasoline Prices the Main Determinant of the Surge in U.S. Consumer Price Inflation?
By Lutz Kilian, Ph.D., Senior Economic Policy Adviser, Federal Reserve Bank of Dallas, and Co-Chair of the Research Council of the J.P. Morgan Center for Commodities; and Xiaoqing Zhou, Ph.D., Senior Research Economist and Advisor, Federal Reserve Bank of Dallas
The article discusses recent evidence that gasoline price shocks have not been the main determinant of U.S. inflation. This evidence runs counter to the narrative that inflation would subside if only gasoline prices could be lowered. The article’s analysis suggests that gasoline price shocks do not have large persistent effects on inflation or long-run inflation expectations, which argues against traditional models of wage-price spirals.
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