Bank of America: If Oil Price Shock Persists, It Could Pave the Way for Fed Easing Policy

BlockBeats News, March 10th: In its report, Bank of America stated that the market currently sees the rise in oil prices as a greater inflation threat, but supply shocks will actually pose risks to both aspects of the Fed's dual mandate.

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

However, the bank noted that at that time, economic demand was significantly stronger (unemployment rate was 4%, core PCE inflation was over 5%, non-farm payrolls were increasing by 500,000 people per month, and consumers still had a large amount of stimulus funds). Today, job growth is slower, inflation is at a mildly elevated level, and fiscal stimulus is more limited. The bank believes that if the oil price shock persists, this will create conditions for the Fed to implement a more accommodative monetary policy. (FXStreet)