Boston Fed research shows oil shocks have a weaker impact on the U.S. compared to the 1970s

Researchers at the Boston Fed stated in a report released on Thursday that an oil price shock similar to the current one triggered by the Iran war would push the U.S. Personal Consumption Expenditures Price Index up by 1.5 percentage points in the following year, whereas in the 1970s it would have raised the index by 2.2 percentage points. The researchers noted that, in the face of a similar shock, employment growth in the 1970s would decline by 1.8 percentage points, but this effect “has largely disappeared in recent years.” Egon Zakrajšek, chief economist at the Boston Fed and one of the report’s authors, believes that this means “monetary policy should pay more attention to the inflation effects associated with oil shocks, rather than employment effects.”