Do Commodity Price Spikes Cause Long-Term Inflation? Do Commodity Price Spikes Cause Long-Term Inflation?

By Geoffrey M.B. Tootell

This public policy brief examines the relationship between trend inflation and commodity price increases and finds that evidence from recent decades supports the notion that commodity price changes do not affect the long-run inflation rate. Evidence from earlier decades suggests that effects on inflation expectations and wages played a key role in whether commodity price movements altered trend inflation. This brief is based on a memo to the president of the Federal Reserve Bank of Boston as background to a meeting of the Federal Open Market Committee.

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