The recently changing nature of the current oil shock with supply-side factors gaining more importance implies a certain risk, however, that this benign scenario may not extend into the future. Central banks therefore have to closely monitor ongoing developments and act appropriately if needed. But what is an appropriate response?
The trade-off faced by monetary policy Does the current benign environment mean that oil price shocks have lost their potentially damaging effects and are no longer a challenge for monetary policy? In my view, this is not the case. A stabilityoriented monetary policy cannot afford to treat oil price shocks with benign neglect.