Because the energy-price term in these models already controls for the decline in energy intensity, this result suggests that other factors also are restraining the pass-through of energy prices to core inflation. Although many factors could have led to these results, a likely explanation is that inflation expectations have become better anchored.
In the 1970s, monetary policy unfortunately allowed large increases in energy prices to have a persistent effect on inflation, a policy that undercut the Fed's credibility and caused long-run inflation expectations to be more volatile. Since that time, however, the Federal Reserve has been more aggressive in fighting all sources of inflationary pressures, including energy price changes.