Economists at Capital Economics believe a sharp drop in commodity prices in recent weeks might prompt the Federal Reserve to reverse the aggressive pace of rate hikes.
The market generally expects that the Fed may raise interest rates by 3 yards once more later this month. At present, most Fed officials have expressed their support. The strong non-farm payrolls report also strengthens the view of raising interest rates by 3 yards, but it brings more to the central bank’s action to combat inflation. big challenge.
As for other markets,WTI CrudeEven following closing at $104.79 a barrel on Friday, recession fears dragged WTI down 3.4% for the week, which some blamed on recession fears.
Capital Economics U.S. economist Andrew Hunter pointed out in a report that the collapse in commodity prices is a cause for concern. Concerns regarding weak demand have dragged oil, agricultural products and industrial metals prices sharply lower in recent weeks. In particular, falling energy prices will affect consumers. For the most immediate impact, gasoline prices have fallen by 20 percent since their mid-June peak, and natural gas prices have fallen by a third.
Generally speaking, the Fed’s interest rate decisions and oil prices are not directly related, because the calculation of the core consumer price index (core CPI), which is a closely watched inflation indicator, excludes volatile energy and food prices.
Still, Capital Economics said lower gasoline prices in the face of the Russia-Ukraine war might still weigh on the Fed’s next move.
other merchandise section,Gold FuturesIt ended higher on Friday, but still fell for a fourth straight week, as the dollar and U.S. Treasury yields rose, with September delivery down.Copper futuresFor the week, it was down 2.3 percent at $3.522 a pound.
As MarketWatch has previously stated, copper is considered a barometer of the global economy because of its wide range of applications, including construction, appliances and electric vehicles. A drop in copper prices might signal a poor economic outlook as fears of a global economic slowdown intensify.
The US will announce the latest CPI data next Wednesday (13th). Capital Economics expects U.S. prices to increase by 1% in June from the previous month, pushing the overall annual rate of inflation to 8.7%.
Hunter said that the June CPI report will reflect the surge in energy prices, but the trend of energy prices has now reversed, coupled with a slight moderation in core inflation, whether the Fed will raise interest rates by 3 yards at the July meeting is not a foregone conclusion. .
