Oil futures slipped as inflation data increased expectations that a hawkish Federal Reserve response would reduce demand.
(Bloomberg) — Oil futures slipped as inflation data increased expectations that a hawkish Federal Reserve response would reduce demand.
The Fed’s preferred inflation measure — the personal consumption expenditures index — came in hotter than economists anticipated, mounting pressure on policymakers to continue aggressive hikes. The report also pushed up the dollar, which added to crude’s slump.
“Energy traders didn’t expect this inflation report to be that market moving initially, considering we already had the hot Valentine’s Day inflation report,” said Ed Moya, a senior market analyst at Oanda. “Once bond traders, started to fully price in 3 full rate hikes, that changed everything.”
Crude prices have been whipsawed this year by optimism that China’s demand will rebound following the end of Covid Zero policies and bearish concerns that the US economy is headed for slowdown. Wall Street banks are starting to temper their outlook for crude prices, with UBS Group AG and Morgan Stanley the latest to trim forecasts.
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