Federal Reserve expected to cut interest rates — latest news
How will the Fed react to the Saudi oil attack?
President Donald Trump renewed his criticism of the Federal Reserve in the wake of the recent attack on Saudi Arabian oil facilities, once again calling on the central bank to cut rates.
The attack, which caused prices to spike as much as 20 per cent Monday, along with soft manufacturing data “will present Chairman Jerome Powell the opportunity to instill some discipline through the statement and the summary of economic projections to his divided committee”, according to Joseph Brusuelas, chief economist at RSM US.
ING strategists noted that central banks could react in a hawkish manner, given the upward shock to inflation through higher oil prices, but are more likely to respond to potential negative pressure on growth.
However, the Fed has the “least room for manoeuvre when it comes to ignoring any spike”, ING added. “With this in mind, we expect investors could view a prolonged increase in oil price as a threat to Fed easing.”
“The recent attack on Saudi oil facilities may give Powell extra cover to emphasize economic risks, but improving economic data and a pickup in inflation will give him little wiggle room,” according to LPL Financial. “Powell has occasionally stumbled in his press conferences when framing the Fed’s intentions, and this one may be particularly challenging.”
Oil gave up a chunk of its gains Tuesday, falling more than 6 per cent amid reports that Saudi Arabia could bring its oil operations back to normal sooner than expected. Brent, the international benchmark, was down 1.6 per cent Wednesday.