Chicago, April 2011

What are the implications of rising commodity prices for inflation and monetary policy? The recent run-ups in oil and other commodity prices and their implications for infla­tion and monetary policy have grabbed the attention of many commentators in the media.

Clearly, higher prices of food and energy end up in the broadest measures of consumer price inflation, such as the Consumer Price Index. Since the mid-1980s, however, sharp increases and decreases in commodity prices have had little, if any, impact on core inflation, the measure that excludes food and energy prices.

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By Charles L. Evans, president and chief executive officer, and Jonas D. M. Fisher, vice president and director of macroeconomic research at the Federal Reserve Bank of Chicago.

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