The US’ position as a modest net energy exporter means a world of near $100 oil prices would not be particularly bad news for the economy. The impact on real GDP growth would still be modestly negative in the near term, as consumers were forced to reduce non-energy spending, but that would be offset over time by the positive effects of stronger income in the oil patch. Recent experience means the Fed would find the accompanying jump in inflation hard to ignore, but we suspect oil prices would need to rise much further – to near $150 for many months – before the Fed considered pivoting to interest rate hikes.
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