For a thorough answer to this question, I would highly recommend reading Bernanke's 2004 speech on this subject. Especially this part: "The public's expectation that inflation will remain low minimizes the second-round effects of oil price increases, which (in a virtuous circle) helps to limit the ultimate effect on inflation. Moreover, well-anchored inflation expectations have been shown to enhance the stability of output and employment. Maintaining the public's confidence in its policies should thus be among the central bank's highest priorities. For this reason, I would argue that the Fed's response to the inflationary effects of an increase in oil prices should depend to some extent on the economy's starting point. If inflation has recently been on the low side of the desirable range, and the available evidence suggests that inflation expectations are likewise low and firmly anchored, then less urgency is required in responding to the inflation threat posed by higher oil prices. In this case, monetary policy need not tighten and could conceivably ease in the wake of an oil-price shock. However, if inflation has been near the high end of the acceptable range, and policymakers perceive a significant risk that inflation and inflation expectations may rise further, then stronger action, in the form of a tighter monetary policy, may well prove necessary. In directing its policy toward stabilizing the public's inflation expectations, the Fed would be making an important investment in future economic stability."(Nick Timiraos)