One tail risk that has suddenly appeared on everyone’s radar is the price of oil.
The consequences of higher oil are real and would take the economy from ‘middling’ to ‘painfully slow’, according to Morgan Stanley researchers. They say a sustained $10 increase in the price of oil will lower US GDP growth by 0.4 precentage points over the following four quarters.
That scenario is far fetched and a spike in prices is unlikely to be sustained so I don’t see too much to worry about.
