Oil prices went up Monday amid market forecasts of more interest rate hikes as core inflation in the US continues to track above the 0.2% month-on-month prints required to get annual inflation down, and optimism over China’s demand recovery dims.
Brent crude rose 0.83% to $83.69 at 11:30 am GST Monday, while US West Texas Intermediate (WTI) crude edged up 0.72% to $76.89% a barrel around the same time.
Crude oil has endured a bumpy start to 2023, after seeing volatility almost throughout 2022. Prices went down after IMF Managing Director Kristalina Georgieva warned at the start of the year that a third of the global economy will be in recession this year and that 2023 will be “tougher” than 2022 as the US, the EU, and China see their economies slowing. Prices went up following China’s reopening last month.
The Federal Reserve raised its target interest rate earlier this month, but at a slower pace, and warned of more increases in the coming months to cool inflation, which still remains elevated. Fed Chair Jerome Powell said at a press briefing that despite the economy’s disinflationary process already starting, it is still premature to declare victory against inflation.
On Friday, Goldman Sachs said it expects the US Fed to raise interest rates three more times this year, by a quarter of a percentage point each, after last week’s data pointed to hot inflation and labor market resilience. Inflation rose by 0.5% in January following a 0.1% increase in December 2022, data showed.
Likewise, economists at the Bank of America said the Fed could hike interest rates further “if inflation, job growth, and consumer demand refuse to soften.”
