Monetary policy and oil price expectations

Dirk Bleich, Ralf Fendel and Jan-Christoph Rülke

Applied Economics Letters, 2012, vol. 19, issue 10, 969-973

Abstract: This article provides robust estimates that the Bank of Canada, Bank of England, Federal Reserve Bank and the European Central Bank (ECB) respond to a 1% increase in oil price expectations with an increase in the interest rate of on average about 11 basis points. To correctly assess the information set of a central bank we use private sector forecasts and disentangle oil price expectations from inflation expectations. We also find asymmetries in the central bank's behaviour and report that those central banks do not respond to the realized oil price.

Date: 2012
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DOI: 10.1080/13504851.2011.608640

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