Bank of America: Continued oil price shocks could pave the way for Fed easing policies.

In a report, Bank of America stated that the market currently views rising oil prices as a greater threat to inflation, but supply shocks actually pose a risk to both sides of the Federal Reserve's dual mandate. The report points out that monetary policy tends to tighten only when consumer demand is strong enough and economic activity can withstand supply shocks, allowing the Fed to focus on inflation as it did during the 2022 Russia-Ukraine conflict. However, the bank notes that at that time, economic demand was significantly stronger (unemployment rate at 4%, core PCE inflation exceeding 5%, non-farm payrolls increasing by 500,000 per month, and consumers still having substantial stimulus funds). Currently, job growth is slower, inflation is moderately high, and fiscal stimulus is more limited. The bank believes that if the oil price shock persists, it will create conditions for the Fed to implement a more accommodative monetary policy. (Jinshi)