How should central banks respond to oil shocks?

Central banks face a classic policy dilemma when oil prices surge – inflation rises but growth might weaken. The right response depends crucially on why oil prices are rising, how persistent the shock is, and whether inflation expectations are at risk. Under current circumstances, it’s probably best for most advanced economy central banks to delay rate cuts but avoid hikes unless inflation expectations rise.

Our senior economists are hosting a live online briefing on what the latest decisions from the Federal Reserve, European Central Bank and Bank of England mean for the monetary policy environment in the US, UK and euro zone at 11:00 ET/15:00 GMT on Thursday, 19th March. Please register here if you would like to attend.