The Bernanke Consensus on Oil Shocks Is Truer Than Ever
It was always a bit silly to equate oil shocks with tighter monetary policy.
The economics of US shale.
Photographer: Justin Hamel/Bloomberg via Getty Images
If we’ve seen the worst of the oil price shock from the Israel-Iran conflict, then another ostensible impediment to Federal Reserve interest rate cuts may have just disappeared.
Oil prices plummeted on Monday as Iran’s response to US strikes on its nuclear facilities proved much more restrained than the worst-case scenario: A closure of the Strait of Hormuz. Though Iran shot missiles at the largest US air base in the Middle East, they were all intercepted without casualties. President Donald Trump announced that the strikes had been telegraphed and that Israel and Iran had agreed to a tentative ceasefire in their conflict. Provided it holds, the signal from energy markets should allow policymakers to cut rates by September.