7 As a result, policymakers must look to lessons that are common across alternative specifications and base policy on our current understanding of the most likely important structural factors. Fortunately, I think that many of the models of nominal price and wage adjustment imply similar conclusions regarding the influence of commodity prices on the inflation outlook and the appropriate response of monetary policy.
I will again focus on a sharp jump in the price of oil, reflecting supply and demand in the market for oil. Because many nominal prices and wages are costly and slow to adjust, the efficient allocation of resources is impeded during a transition period in which relative price signals are distorted.