Oil prices rebound as the Fed commits to inflation battle
Oil prices were showing signs of recovery in last night’s trading, with a sustained hawkish approach from the Federal Reserve raising hopes of an economic revival in the US – which could drive up demand.
Brent Crude climbed 1.55 per cent to 77.08 per barrel on Wednesday evening, with WTI Crude up 1.88 per cent to $72.53 per barrel.
Jerome Powell, chair of the world’s most influential central bank, has hinted that the Fed will continue to hike interest rates over the year to contain inflation.
In testimony prepared for delivery at a congressional committee, he warned that the fight to lower inflation “has a long way to go.”
Inflation remains supremely challenging across developed economies, with the Bank of England expected to raise interest rates a chunky 50 basis points after the latest data showed inflation held at 8.7 per cent last month.
Despite renewed optimism of a US economic recovery, Craig Erlam, senior markets analyst at OANDA, warned inflation could weigh down oil markets again.
He said: “Countries are struggling to rein in inflation – the UK this morning a prime example of that – and that’s going to dampen growth and threaten recessions across the globe. This summer was crucial in determining the scale of the job still to do and so far, investors arguably have more cause for pessimism than optimism..”
As for upcoming headwinds, official oil inventory data from the American Petroleum Institute and the Energy Information Administration’s report on supplies are expected to be published by tomorrow – which could indicate the future direction of the market.