mpc.theyserveforyou.com

mpc: 14 However, there were several reasons why the economic impact of the oil price rise might be less than in previous episodes. The oil price in real terms was still low relative to its previous peak in 1979-80 and the oil intensity of production had fallen, as had the share of oil and related products in consumer spending. In most industrial countries, labour markets had become more flexible and inflation expectations were better anchored, so that second-round effects on inflation were likely to be less than before; that would give monetary authorities more scope to address any adverse consequences of the oil price rise for demand. However, it was too soon to be sure about the second-round effects on wages and prices, as the first-round effects were still working their way through the supply chain.

Money, credit, demand and output