I will close by briefly linking this discussion to recent Federal Reserve policy. As a professor and textbook author, I was accustomed to discussing the effects of a particular phenomenon, such as rising oil prices, with all other factors held equal. However, as policymakers know, everything else is never held equal. The increases in oil prices this year did not take place in isolation.
Along with the rise in oil prices, increases in the prices of other important commodities, such as steel and lumber, as well as higher import prices resulting from the earlier decline in the dollar, provided supply-side pressure on inflation in early 2004.