Fed Officials Rule Out Transitory Energy Price Shock

Senior officials at the Federal Reserve are signaling that they will not treat the sharp rise in energy prices as a transitory shock. This means that they are placing greater weight on the possibility that inflationary pressures will persist longer than expected, and have not ruled out additional rate hikes.

Chicago Federal Reserve Bank President Austan Goolsbee said that 'the Fed typically does not treat energy shocks as 'transitory,' but added that 'we can no longer afford to wait simply because it's an energy shock.'

Goolsbee stated that the risk of inflation becoming entrenched well above the 2% target has increased, and that he is willing to pursue further tightening. This hawkish stance from Fed officials is pressuring market participants to price in the possibility of additional rate hikes before year-end.