Do Oil Prices Predict Inflation?

Mehmet Pasaogullari and Patricia Waiwood

Economic Commentary, 2014, issue Feb.

Abstract: Some analysts pay particular attention to oil prices, thinking they might give an advance signal of changes in inflation. However, using a variety of statistical tests, we find that adding oil prices does little to improve forecasts of CPI inflation. Our results suggest that higher oil prices today do not necessarily signal higher CPI inflation next year, although they do help to explain short-term movements in the CPI.

Date: 2014
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