The U.S. Federal Reserve decided Wednesday to hold interest rates steady in September, suggesting there may be fewer rate cuts next year than analysts had previously expected.
However, with inflation remaining elevated despite a relatively strong economy, the Fed has signaled that there may be another rate hike later this year.
Wednesday’s decision means that the benchmark short-term interest rate will remain at between 5.25 percent and 5.5 percent, a 22-year high.
This will be only the second time since March 2022 that the Fed’s meetings have come to an end without another rate hike.
But oil could be the thing that pushes the Fed over the cliff.
“Economic data reports continue to show a slowing economy. … If there’s one thing that could potentially persuade the Fed to raise rates later this year, it’s oil,” CNN quoted JJ Kinahan, chief executive of IG Group North America, as saying on Wednesday.
“At a time when central banks are starting to see the light at the end of the inflation tunnel, $100+ oil is going to be incredibly unwelcome and unhelpful,” said Craig Erlam, senior market analyst at Oanda. I’m not sure there’s much economic sense in tipping the global economy into recession if OPEC+ persists with these cuts, which makes me wonder how high the price will go and how sustainable it will be,” as reported by Yahoo Finance.