Fed Research Warns Oil Pass-Through to Core Inflation Threatens Tighter Policy

Federal Reserve staff research reveals that rising oil prices now feed more significantly into core inflation, complicating central bank rate trajectories and risking sustained tighter monetary policy. Post-2021 data across five advanced economies shows a 10-percentage-point increase in relative oil inflation correlates to a 0.14-percentage-point rise in core inflation, up from an insignificant 0.01 percentage point previously. Continued pass-through could push core inflation toward 2.8% by 2027. This heightened transmission poses macroeconomic headwinds and threatens to delay liquidity easing, potentially restraining risk appetite across markets including Bitcoin.