Do Oil Prices Predict Inflation?
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.
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Description: Full text
Provider: Federal Reserve Bank of Cleveland
Part of Series: Economic Commentary
Publication Date: 2014
Issue: Feb.Order Number: 1