Oil Prices and ECB Monetary Policy

The ECB and the Eurosystem should take past, present, and predicted future oil-price movements into account in its monetary policy depending on how these movements affect the inflation and output-gap forecasts that should guide monetary policy. Oil price movements have complex effects on these forecasts, so the impact of oil price movements on policy is complex. Hence, an evaluation of whether the ECB has responded appropriately to past oil-price movements is a somewhat demanding exercise. Oil prices have moved dramatically in the last two years. The price of Brent crude oil