Bank of America: If oil price shocks persist, they may pave the way for Federal Reserve easing policies

BlockBeats News, March 10, Bank of America stated in a report that the market currently views rising oil prices as a greater inflation threat, but supply shocks actually pose risks to both aspects of the Federal Reserve's dual mandate.

The report pointed out that only when consumer demand is strong enough and economic activity can withstand supply shocks does monetary policy tend to tighten, allowing the Federal Reserve to focus on inflation as it did during the 2022 Russia-Ukraine conflict.

However, the bank noted that at that time, economic demand was clearly stronger (unemployment rate at 4%, core PCE inflation above 5%, nonfarm payrolls increasing by 500,000 per month, and consumers still holding a large amount of stimulus funds). Today, employment growth is slower, inflation is moderately high, and fiscal stimulus is more limited. The bank believes that if the oil price shock persists, it will create conditions for the Federal Reserve to implement a more accommodative monetary policy. (Golden Ten Data)