Oil Prices & The Bond Market

It's no secrete that fluctuations in oil prices can lead to dramatic swings in headline price inflation, as chart 1 below shows. After all, not only does oil fuel the vast majority of transportation needs, it's also a critical raw material used in consumer products far and wide, and much of the price swings in oil are passed on to consumers. With oil moving higher compared to year-ago prices, we should naturally expect a transitory boost to headline CPI as a result.