The Fed raised rates by a quarter point in September while oil prices were climbing after attacks disrupted shipping through the Strait of Hormuz. Gasoline hit $4.43 a gallon that month. Energy inflation was running at 20.4% annually, but core inflation was also rising, reaching 2.6%. The Fed can’t restore tanker traffic or produce cheaper oil. It can make borrowing more expensive, slowing business investment, hiring and consumer spending.
The October jobs report showed 165,000 new jobs, but 4.8 million people were working part-time because they couldn’t find full-time work, and long-term unemployment accounted for 27.6% of the jobless. There’s a lesson from the Volcker era: rates reached 19% in 1981, inflation eventually fell, and unemployment climbed to 10.8%. The Fed is trying to prevent an oil shock from becoming broader inflation. Workers could pay for that fight.
https://www.federalreserve.gov/monetarypolicy/files/monetary20260916a1.pdf
https://newsroom.aaa.com/2026/09/pump-prices-keep-climbing-as-crude-oil-remains-high-2/
https://www.bls.gov/news.release/archives/cpi_10142026.htm
https://www.bls.gov/news.release/archives/empsit_11062026.htm
https://www.federalreservehistory.org/essays/recession-of-1981-82
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