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March 11 - While inflation met expectations last month, it remained stubbornly high, driven by rising gasoline prices. This inflation report reveals the true state of U.S. consumer prices before the energy cost surge triggered by the Iran war. However, the data released Wednesday was overshadowed by the conflict that erupted following the February 28 U.S.-Israeli attack on Iran. Oil prices fluctuated wildly due to the rare blockade of shipping lanes through the Persian Gulf. Gasoline prices have already jumped significantly, and prices are expected to rise further when this months inflation data is released in early April. Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives, predicts that Marchs month-over-month inflation could rise as much as 0.8% or 0.9%, which would be the largest monthly increase in nearly four years, easily pushing the annual inflation rate above 3% and close to 4%.Market news: The US dollar strengthened after the release of US CPI data, and the foreign exchange sentiment index fell to its lowest level of the day.Japans Ministry of Industry and Trade: If an agreement is reached on a coordinated release of oil reserves led by the International Energy Agency, the oil that Japan plans to release will be included in that total.Senator Scott, Chairman of the Senate Banking Committee, said he spoke with Federal Reserve Chairman Jerome Powell about testifying and recommended that Powell appear in court to testify.On March 11th, analyst Justin Lahart stated that US inflation is largely in line with expectations; the current issue is how long oil prices will remain high. The market is currently focused on the extent of the oil price surge, but for the broader economy, a more important question may be where prices will stabilize within a year. A sharp, rapid reversal can be absorbed, leaving a relatively small lasting impact on inflation readings and allowing the Federal Reserve to refocus on the health of the labor market. However, persistently high oil prices will be difficult to shake off. This is because it will give supply chains time to lock in high costs, squeezing profit margins of companies already burdened by tariffs and leading some companies to consider raising prices for consumers. In this scenario, the Federal Reserve may face a difficult trade-off between trying to control inflation and protecting economic growth.

Oil Prices Tumble 5% When the IMF Lowers Its Growth Forecast

Charlie Brooks

Apr 20, 2022 09:41

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Prices fell despite decreased production from OPEC+, which produced 1.45 million barrels per day (bpd) less than its goal in March, as Russian supply started to plummet as a result of Western sanctions over Russia's invasion of Ukraine, according to a report obtained by Reuters from the producer alliance.


Russia produced around 300,000 barrels per day less than its aim of 10.018 million barrels per day in March, according to secondary sources.


OPEC+, which consists of OPEC and its partners headed by Russia, decided last month to increase oil production by 432,000 barrels per day (bpd) in May, defying demand from big customers to produce more.


The IMF cut its global economic growth projection by almost a full percentage point, citing Russia's invasion, and warned that inflation has become a "clear and present risk" for many nations.


The negative prognosis exacerbated pricing pressure already exerted by the dollar's two-year high. A stronger dollar increases the cost of commodities priced in dollars for holders of other currencies, which might depress demand.


President of the Chicago Federal Reserve Bank Charles Evans said Tuesday that the Fed may boost its policy rate goal range to 2.25 percent to 2.5 percent by year's end, but would likely need to raise rates further if inflation continues elevated.


Meanwhile, St. Louis Federal Reserve Bank President James Bullard said Monday that US inflation is "far too high," as he argued for raising interest rates to 3.5 percent by the end of the year in order to lower what have already reached 40-year highs.


The IMF's reduced growth prediction, along with the Strategic Petroleum Reserves' warning on Monday that emergency inventories declined by 4.7 million barrels, is "creating some worry," according to Phil Flynn, an analyst with Price Futures Group.


Concerns about demand growth were already in the spotlight after a preliminary Reuters poll on Monday that indicated 8849|US crude oil inventories likely increased last week.


China's economy faltered in March, exacerbating an already bleak picture exacerbated by COVID-19 restrictions and the Ukraine war.


China, the world's top oil importer, may see an increase in fuel consumption as industrial units prepare to restart in Shanghai.


Tuesday's price fall follows a more than 1% increase on Monday, when oil prices reached their highest level since March 28 due to Libyan oil supply delays. Libya's National Oil Corporation (NOC) warned Monday of a "painful wave of closures" and imposed force majeure on certain production and exports as eastern troops stepped up their embargo of the industry amid a political deadlock.


NOC imposed force majeure at the Brega oil port on Tuesday.


Boris Johnson, the Prime Minister of the United Kingdom, emphasized the need of increasing pressure on Russia via more sanctions and diplomatic isolation during a call with Western leaders on Tuesday.


The prospect of a European Union-imposed embargo on Russian oil kept the market on edge. French Finance Minister Bruno Le Maire stated Tuesday that an EU-wide ban was being considered.

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