An article in the Journal (gated) ahead of Wednesday’s FOMC. Not flagging a Fed Funds rate hike this time around, but further head?
- traders and petroleum refiners are draining oil stockpiles at a rapid clip
- Many analysts expect crude prices to keep rising, which would feed into higher fuel bills, quicker inflation—and, potentially, higher interest rates.
- The Federal Reserve is expected to hold rates steady on Wednesday while leaving the door open to further increases. The central bank excludes volatile energy markets when it sets borrowing costs. But surging oil prices trickle into inflation of other goods and services. That could prop up price pressures while slowing the economy—the scenario that the Fed and investors hope to avoid.
Bolding above is mine. Yep, it’s the flow on effects that’ll be a concern. Adds the Journal:
- “This clearly risks pushing…inflation slightly higher again,” said David Fyfe, chief economist at commodities data firm Argus Media. “It is something that may encourage, through the end of the year, further interest-rate hikes.”
I posted this pic in jest a few weeks ago. Maybe oil will have the last laugh though.
This article was written by Eamonn Sheridan at www.forexlive.com. Source