The U.S. central bank hasn't published much research on the link between commodity prices and inflation since the 1990s, when analysts found that companies limited the amount of raw materials costs they passed on. The Fed found problems from rising oil prices in the 1980s were exacerbated by lenient central bank policies.
The Fed last month issued an updated economic forecast predicting inflation will moderate in coming months — assuming proper interest rate policy — as growth slows and oil prices decline.
IMF economists Valerie Mercer-Blackman and Kevin Cheng estimate the surge in oil and other commodity prices will have a small inflationary impact in industrialized nations where economies are less energy-intensive than in the past and central banks have gained greater inflation-fighting credibility. The impact could be greater in developing nations.
And Dallas Fed President Richard Fisher has noted the odds of a "more pernicious" bleed-through from commodity prices are greater now than in recent years. The Fed's recent beige book look at economic conditions noted, for example, that three-fourths of manufacturers surveyed in the Boston Fed region raised prices to compensate for higher production costs.
That's not new to consumers, who are already scaling back.
"Inflation is mostly here. We are already seeing higher prices filter down to the consumer," says John Thomas, an analyst in McLean, Va. "My SUV is mostly parked, and I drive a smaller car, but I have cut back on other expenses, like entertainment, gift shopping and weekend road trips," Thomas says. "Next to go will be premium food."