Oil touching $95 a barrel is bad news for the economy and the Fed's plans
by Zachary Halaschak, Economics Reporter
September 28, 2023 02:23 PM
Oil prices are at their highest level in more than a year, a fact that doesn’t bode well for the inflation situation and could complicate the Federal Reserve’s plans.
U.S. West Texas Intermediate futures briefly reached above $95 per barrel on Thursday, the highest level since August 2022. The higher crude prices will ultimately translate into higher gas prices and ding the Fed’s effort to tame inflation.
The national average for regular formulation gasoline is about $3.84 and prices recently reached their highest seasonal level in more than a decade. Prices usually tumble as demand from the summer travel season cools off.
While rising gas prices make filling up cars and commuting to work more expensive, the higher oil prices also translate to more expensive home heating as temperatures start to decline. That is all bad news for the Fed because higher oil and gas prices end up adding to overall inflation.
“I think the key here is that this has provided another reason for consumers not only to be irritated but also face price pressures,” Mark Hamrick, senior economic analyst at Bankrate, told the Washington Examiner.
The Fed has been trying to achieve a “soft landing” in which it drives down inflation without knocking the economy into a recession. Interest rate revisions are the main tool the central bank has to drive down prices, but the higher the rates, the greater the likelihood that the economy will take a hit. The Fed has raised interest rates 11 times over the past 1 1/2 years in an effort to achieve that goal.
more
https://www.washingtonexaminer.com/policy/economy/rising-oil-prices-bad-inflation-complicates-fed-decisions
