Unlike in the 1970s, these price shocks did not result in a broad and lasting increase in overall inflation because the public believed the Federal Reserve would keep inflation in check.
The FOMC wasn’t forced to raise interest rates – which softened the blow of higher fuel costs on households and businesses – because of the credibility the Federal Reserve had built since the 1980s. If the public’s expectations have always been important, you might wonder how monetary policy had any effect prior to the transparency revolution.