How the Federal Reserve has addressed — and in some cases not addressed — past surges in oil prices

Fed's Approach to Recent Oil Price Surge Depends on Duration

Federal Reserve Chair Jerome Powell recently stated that the central bank's reaction to the most significant rise in oil prices since the 1970s will largely depend on how persistent the current energy shock proves to be. At present, Fed officials are closely monitoring developments to assess the situation.

“Ultimately, it will depend on how long these conditions persist, what impact they have on overall prices, and how consumers respond,” Powell explained to the press last week. “The consequences for the economy could vary widely—they might be more pronounced, less significant, or anywhere in between. At this stage, it's impossible to predict.”

Traditionally, the Federal Reserve has not taken immediate action in response to oil price shocks, according to prevailing economic thought.