Why are the oil and yield curves underemphasized?
For a variety of reasons, we believe that the importance of oil prices has been underestimated, and we have some company in holding this view. “Of the number of factors that have contributed to the slowing of economic growth in the United States over the past few quarters, the one that has received less attention than it clearly merits is the rise in energy prices. In what may or may not be coincidence, at least the last three recession periods in the United States—those of 1990-91, 1980-82, and 1974-75—were preceded by spikes in the price of oil. As a consequence, we at the Federal Reserve are especially attentive to developments in energy markets and their effects on the behavior of households and businesses. Obviously, caution is required in drawing generalizations from only three observations, and indeed many analysts do not place much credence in the link between oil prices and the business cycle.” [highlights added] — Chairman Alan Greenspan (2001 speech before the Economic Club
