• 4 minutes Energy Armageddon
  • 6 minutes How Far Have We Really Gotten With Alternative Energy
  • 10 minutes Wind droughts
  • 18 hours "Biden Is Running U.S. Energy Security Into The Ground" by Irina Slav
  • 3 days "Natural Gas Price Fundamental Daily Forecast – Grinding Toward Summer Highs Despite Huge Short Interest" by James Hyerczyk & REUTERS on NatGas
  • 4 hours "How to Calculate Your Individual ESG Score to ensure that your Digital ID 'benefits' and money are accessible"
  • 3 days Oil Stocks, Market Direction, Bitcoin, Minerals, Gold, Silver - Technical Trading <--- Chris Vermeulen & Gareth Soloway weigh in
  • 10 days "Forget Oil, The Real Crisis Is Diesel Inventories: The US Has Just 25 Days Left" by Zero Hedge - 5 Stars *****
  • 3 days The Federal Reserve and Money...Aspects which are not widely known
  • 23 hours "Europe’s Energy Crisis Has Ended Its Era Of Abundance" by Irina Slav
  • 7 days Is Europe heading for winter of discontent with extensive gas shortages?
  • 3 days "Dodgy Demand Data? The Oil Price Collapse Conspiracy" by Alex Kimani
  • 10 days "The Global Digital ID Prison" by James Corbett of CorbettReport.com
  • 11 days Goldman Betting on Cryptocurrencies
  • 14 days Сryptocurrency predictions

Oil Markets On Edge As Fed Signals More Rate Hikes To Come

The Fed has more work to do in taming inflation and the key interest rate needs to move up to above 4% by early 2023 and stay there, Cleveland Federal Reserve Bank President Loretta Mester said on Wednesday, in a message that could further drive down oil prices.  

The Fed’s current target policy rate is in the 2.25%-2.5% range, after two consecutive hikes of 75 basis points, or 0.75%.  

Markets fear that aggressive interest rate hikes from central banks, including the Fed, would slow down economies – and oil demand growth – for a prolonged period of time. Oil prices were headed early on Wednesday for a third consecutive month of losses, which began in June with the first large Fed rate hike.   

In a Friday speech, Federal Reserve’s Chair Jerome Powell said that large interest rate hikes could continue and could slow the economy “for some time,” and that rates could be higher for longer.  

“July's increase in the target range was the second 75 basis point increase in as many meetings, and I said then that another unusually large increase could be appropriate at our next meeting,” Powell added. 

During a speech at the Dayton Area Chamber of Commerce in Dayton, Ohio, Cleveland Fed President Mester said today “My current view is that it will be necessary to move the fed funds rate up to somewhat above 4 percent by early next year and hold it there; I do not anticipate the Fed cutting the fed funds rate target next year.” 

Related: BP Looks To Restart The Midwest’s Largest Refinery

Economic slowdown is to be expected, although a U.S. recession is not a base-case scenario, Mester said. 

“I do acknowledge that the risks of recession over the next year or two have moved up because financial conditions are tightening globally, inflation remains at high levels in many countries, and the devastating war in Ukraine adds considerable uncertainty and downside risks to the growth outlook, especially in Europe,” Mester noted. 

“That said, at this point, I have not incorporated a recession into my baseline outlook for the U.S., but instead expect a fairly sharp slowing in activity, especially when compared to the robust growth the U.S. experienced in 2021.” 

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:

Join the discussion | Back to homepage

Leave a comment

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News