Bob Elliott
· Nonconsensus
· March 17, 2026 at 10:29
· ⏱ 4 min read
| Read on Substack ↗
Summary
The author argues that contrary to market hopes, the Federal Reserve is unlikely to cut interest rates in response to an oil shock. Historical precedent suggests the Fed is more likely to pause or even hike rates to combat the resulting inflationary pressures, even at the expense of slowing real growth.
•Market participants are hopeful the Fed will cut rates to support growth amid the current oil shock.
•A historical review indicates the Fed typically does not cut rates in response to oil shocks.
•The more likely Fed responses are to pause rate changes or even hike rates to fight inflation.
•Oil shocks create a challenging stagflationary environment for central banks, with pressure for both higher inflation and slower growth.