Good morning. This is Jihye Lee writing to you from Singapore. I'm sitting in for the rest of this week for Yeo Boon Ping, who is on leave.
The Federal Reserve has a new headache: oil prices. The output cut announced by OPEC+ seems to have knocked out the optimism that traders priced in last week, with rising crude adding to fears of higher — and stickier, no pun intended — inflation.
That means even more complications for the Fed, which already hiked rates to their highest level since 2007 and just faced turmoil in the banking sector. It's also dealt with manufacturing slumping to a three-year low — all with an expected recession looming.
Many of the Fed's global peers have followed suit. Today, the Reserve Bank of Australia meets, and traders have mixed expectations. Some see a pause in rate hikes and potentially a chance to do what the Fed seems to find it increasingly difficult to do: bring in the economy for a soft landing.
As oil prices maintain higher levels, analysts warned the move could push oil back above $100, a level it reached last year for the first time in 2014 after Russia invaded Ukraine. The latest move by OPEC+ supports the view that the United States is losing influence with the bloc's core producers, such as Saudi Arabi and the UAE, according to Andy Critchlow, EMEA head of news at S&P Global Platts.
In fact, U.S. Treasury Secretary Janet Yellen said the production cuts could, down the line, merit a reassessment of the $60-per-barrel price cap set on Russian oil — but not for now. She also called the output cut an "unconstructive act" for efforts made by the U.S. to curb inflation
