Will oil prices stay low forever?
In a new post, researchers at the St. Louis Fed ask if this chart — comparing inflation expectations in 5 years with the price of crude oil — means the market thinks the drop in oil prices is permanent.
Michael Owyang and Hannah Shell of the St. Louis Fed write:
While oil prices can pass through and affect other prices, the almost one-to-one movements in the two series seem to be unusual. Pass-through from oil to other prices is incomplete. If the price increase in oil was deemed to be temporary, the 5-year inflation rate would not move in unison with oil prices (little pass-through). In this case, it appears there’s at least some belief that the change in oil prices will persist, as there is substantial pass-through.
In her latest press conference, Fed chair Janet Yellen said she expects the impact to inflation from oil prices will be transitory.
But this chart seems to be telling a different story.
Business Insider Emails & Alerts
Site highlights each day to your inbox.