Oil Prices as the Third Indicator of the US Federal Reserve’s Monetary Policy

Global oil prices make the US Federal Reserve System dependent on oil-exporting countries and negatively impact the US economy, weakening the country’s competitiveness. This research is relevant because it sheds light on the existing influence of global oil market conditions on the monetary policy of the US Federal Reserve System and the US economy. The aim of this study is to provide economic and mathematical modelling of the relationships between global oil prices, the monetary policy of the US Federal Reserve System, and the US economy. Special scientific methods were used in the study: the Dickey-Fuller test, the KPSS test, correlation analysis, time series detrending, time series smoothing using a centered moving average, and Koyck regression model. The results of the study demonstrate that global oil prices are the third indicator of the US Federal Reserve System’s monetary policy, as they influence the federal funds rate and the US money supply. This identified link is hidden; it is not visible through the impact of global oil prices on consumer inflation, as energy prices are excluded from the calculation of the US Federal Reserve’s consumer inflation target. Thus, in the long term, the United States is dependent on global oil market conditions, as they determine the direction of the Federal Reserve’s monetary policy and shape the country’s macroeconomic situation. Further research should focus on a detailed study of US economic indicators influenced by global oil prices, with the aim of developing measures to reduce the country’s competitiveness.

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