Oil Prices Drop After US Fed Official Suggests Delaying Interest Rate Cuts
Singapore
Oil prices fell on Friday after a U.S. Fed official suggested delaying interest rate cuts for at least two more months, causing a drop in futures. Brent crude futures were down 25 cents, or 0.3%, at $83.42 a barrel at 0212 GMT, while U.S. West Texas Intermediate crude futures were 25 cents, or 0.3%, lower at $78.36.
Policy Delay
U.S. Federal Reserve policymakers are advised to delay interest rate cuts by at least another couple of months to assess if a recent uptick in inflation indicates stalling progress towards price stability or is just a temporary setback. Fed Governor Christopher Waller made this statement on Thursday, emphasizing the need for caution before implementing any rate adjustments.
Impact on Economic Growth
Higher interest rates for longer periods can slow economic growth, leading to reduced oil demand. The U.S. central bank has maintained its policy rate steady in the 5.25%-5.5% range since last July, with most central bankers expressing concerns about moving too quickly to ease policy, as indicated in the minutes of the latest policy meeting.
Delaying Rate Cuts
Waller also dismissed concerns about the Fed potentially triggering a recession if it delays rate cuts, asserting that the central bank can afford to “wait a little longer.” These comments from Waller impacted oil benchmarks, causing them to retract some of their gains from the previous day.
Geopolitical Tensions
Oil futures had experienced an increase on Thursday due to ongoing hostilities in the Red Sea, with Iran-aligned Houthis intensifying attacks near Yemen in support of Palestinians in the Gaza conflict. Israel Prime Minister Benjamin Netanyahu’s war cabinet approved sending negotiators to Gaza for truce talks taking place in Paris, adding to the escalating tensions in the Middle East.
