Goolsbee: Oil Surge Could Disrupt Inflation Reduction If Persistent
Federal Reserve Bank of Chicago President Austan Goolsbee warned that rising oil prices pose a "quite serious" risk to the process of reducing inflation in the United States, especially if they persist over a prolonged period. He believes the duration of the price spike is a key determinant of its impact on the economy.
According to Goolsbee, if the oil price increase persists for a prolonged period, pressure could spread to consumer sentiment and lead to increased costs across various sectors, including food prices and manufacturing activity. This spillover effect is considered to have the potential to slow the improvement in inflation, which was previously expected to ease.
He also highlighted that the surge in gasoline prices could create additional complications, as it risks pushing up public inflation expectations. If this occurs, the Fed could be in a more difficult position in maintaining the balance between controlling inflation and maintaining economic momentum.
Nevertheless, Goolsbee believes that there are still a number of forces supporting the economy. However, he emphasized that the oil price shock adds a level of uncertainty, making the future direction of inflation more difficult to predict. Goolsbee added that this kind of uncertainty contributes to labor market dynamics that tend toward "low hiring and low firing." Going forward, he indicated that the main focus will be on how long oil prices remain high and how they impact consumer behavior and price formation in the real sector. (asd)
Source: Newsmaker.id
