MONETARY POLICY AND OIL PRICES

This article discusses the relationship between monetary policy and oil prices and, in a broader sense, commodity prices. Firstly, it focuses on describing the relationship between key macroeconomic variables, gas prices and other commodity prices relative to oil prices. Subsequently, it discusses the existence of “transmission channels” through which monetary policy can be propagated to oil prices (or prices of commodities). It then provides an insight into the CNB’s forecasting process, both by looking retrospectively at the oil price outlook in the past and by analysing a transitory and a permanent shock (a rise in the oil price of USD 30/b). The simulated oil price shock is calculated from the average level of Brent oil prices in the first quarter of 2010, i.e. USD 77.50/b