Fed officials typically focus on core inflation data, which strips out food and energy prices, but that doesn't mean they or investors can ignore another spike in crude prices. DataTrek Research noted that the correlation between energy prices and core CPI data has returned to levels seen since the seventies and eighties, indicating that higher oil prices are increasingly affecting core inflation. The data shows that since 2020, the correlation between the two has been 0.62, much higher than the long-term average of 0.31, indicating that the impact of higher oil prices on core inflation cannot be ignored. Core inflation measures typically exclude volatile categories such as food and energy. While this approach is negligible to the share of food and energy spending in consumer spending, the logic behind it is that these programs are less responsive to monetary policy. As a result, broad monetary policymakers are placing greater emphasis on core inflation data to better understand the categories they can affect. For example, the Personal Consumption Expenditures Price Index (PCE) is often valued by the Fed as an inflation indicator, but that doesn't mean that energy or food price increases can be ignored. Energy is a factor of production that affects overall prices, so the impact of higher oil prices on core inflation data cannot be ignored. Recent data shows that the impact of energy prices on core inflation is the biggest since the 70s/80s of the 20th century, so higher oil prices are an issue that the Fed and capital markets should be concerned about. The same goes for rising food prices, which also need to be of concern to investors. Recently, oil prices have been on a high track, accelerating after Saudi Arabia announced that it would cut production by 1 million b/d and Russia also promised to extend the cuts. U.S. benchmark West Texas Intermediate rose for the ninth straight day on Wednesday, and global benchmark Brent crude moved higher for a seventh straight day, both closing Wednesday at highs since 2023. However, oil prices retreated slightly on Thursday. As oil prices rise again, start thinking about the inflation-related spillovers of this movement. Higher crude oil prices could further push up fuel prices, including gasoline and diesel. Some investors and analysts believe that this week's surge in oil prices is a big reason for the rise in US Treasury yields. Market participants began to digest the prospect of interest rates remaining at higher levels for longer, or weighed the possibility that the Fed might need to take more monetary policy tightening actions, which also pushed the dollar up to some extent. The dollar index hit a six-month high, suggesting that inflation-related spillovers are beginning to emerge as oil prices rise. As oil prices rise again, start thinking about the inflation-related spillovers of this movement. Will higher crude oil prices undermine the recent downward trend in inflation?