Pain without Purpose
Tim Duy: Commodity Shock

Oil Price Shocks

Macro Advisers:

An increase in oil prices of $10/bbl for one year starting in the first quarter of 2011 would:

  • Reduce GDP growth by about 0.3 percentage point over the first half of the year and by 0.2 percentage point over the entire year.
  • Headline PCE inflation would be about 0.1 percentage point higher over the year, and the unemployment rate would also be about 0.1 percentage point higher.

We will issue a more extensive alternative scenario next week that will incorporate a significantly higher path of oil prices and related financial-market spillovers after the completion of our forecast update...stay tuned.