The U.S. Federal Reserve has already failed on inflation, they must not do so again by “hitting the brakes too hard with too many rate hikes,” affirms the CEO of one of the world’s largest independent financial advisory, asset management and fintech organisations.
The comments from deVere Group’s Nigel Green follow the world’s most influential central bank on Wednesday refusing to rule out an aggressive run of interest rate rises as he all but confirmed the first increase would be implemented in March.
He says: “As was widely expected by the markets, the Fed – now in hawkish mode – has practically green-lit a rate rise for the first time in three years in March as it tries to take on surging inflation, which is running at its hottest in 40 years.
“The Fed admitted that inflation may not drop toward its pre-pandemic levels any time soon, and that the rise in prices could, in fact, speed-up.
“Why, then, did the world’s most powerful central bank not act sooner to stem this off quicker?
“This grand scale inaction must be the biggest miscalculation in the Fed’s history.”
He continues: “However, now the debate is focusing on how fast the U.S. central bank will move toward policy normalization.”
Some leading experts on Wall Street are saying there could be up to five rate hikes in 2022, others are now suggesting even more than this.
“I would urge the Fed not to fail on inflation again by hitting the brakes with too many rate hikes,” says Nigel Green.
“The excess money in the system will come out fast. There’s a real risk that numerous interest rate hikes would cause a recession and may not even slow inflation as the soaring prices are triggered by supply chain issues which the Fed’s hikes will not solve.”
At Wednesday’s meeting, the Chair Jerome Powell swerved a question about whether the Federal Open Market Committee (FOMC) would raise rates at all subsequent meetings this year, which would mean seven increases in 2022.
The deVere CEO concludes: “With booming demand, snarled supply chains and high levels of wage growth, the Fed might be tempted to act too fast with rate hikes this year.
“But such moves could turn out to be a masterclass in the law of unintended consequences.”
Libyan Oil Field and Gas Link to Italy Reopen After Protesters Withdraw
Following a brief interruption, operations at an oil field in western Libya and a natural gas link to Italy have resumed as protesters retreated from the facilities.
The demonstrators withdrew after receiving assurances from the government regarding their demands.
The Wafa oil field, which typically produces between 40,000 to 45,000 barrels per day, recommenced shipments after a temporary halt prompted by guards’ demands for improved compensation.
Similarly, the gas pipeline connection to Italy is once again operational, according to sources familiar with the situation who preferred anonymity due to the sensitivity of the matter.
Protests disrupting energy infrastructure and output are not uncommon in Libya.
In recent times, demonstrations have frequently disrupted operations, with the significant Sharara oil field experiencing prolonged suspension last month due to similar protests, invoking a force majeure clause in contracts.
The resumption of activities marks a relief for both the Libyan energy sector and Italy, which heavily relies on the natural gas link for its energy needs.
However, the incidents underscore the ongoing challenges faced by Libya in maintaining stability within its vital energy infrastructure amidst socio-political unrest.
Efforts to address the grievances of protesters and ensure sustained operations remain pivotal for the country’s economic well-being and regional energy dynamics.
Oil Prices Dip on Monday as Dollar Gains
Oil prices experienced a downturn, extending losses from the previous session as the U.S. dollar surged against global counterparts to impact market sentiment.
Brent crude oil, against which Nigerian oil is priced, slipped by 0.2% to $81.48 a barrel while U.S. West Texas Intermediate crude (WTI) declined by 0.3% to $76.27 a barrel.
The upward trajectory of the dollar renders oil more costly for holders of other currencies, contributing to the decline in oil prices.
This downward trend follows a week of losses, with Brent declining approximately 2% and WTI falling over 3%.
Market participants attribute these fluctuations to concerns about inflation potentially delaying anticipated cuts to high U.S. interest rates. Such expectations have been suppressing global fuel demand growth.
Analysts observe a retreat in the risk-on sentiment, coinciding with heightened expectations of prolonged interest rates.
Tina Teng, an independent analyst based in Auckland, notes that the recent market rally led by Nvidia has stalled, as elevated rate expectations bolster the U.S. dollar, thereby pressuring commodity prices, including oil.
Despite geopolitical tensions such as the Israel-Hamas conflict and attacks on ships in the Red Sea, which could have traditionally boosted oil prices, the impact remains modest.
Moreover, investors are monitoring developments surrounding Russian oil supply following recent U.S. sanctions on Moscow’s leading tanker group.
Amidst these uncertainties, Qatar’s decision to increase liquefied natural gas production further adds to global energy supplies.
Crude Oil Dips Slightly on Friday Amid Demand Concerns
On Friday, global crude oil prices experienced a slight dip, primarily attributed to mounting concerns surrounding demand despite signs of a tightening market.
Brent crude prices edged lower, nearing $83 per barrel, following a recent uptick of 1.6% over two consecutive sessions.
Similarly, West Texas Intermediate (WTI) crude hovered around $78 per barrel. Despite the dip, market indicators suggest a relatively robust market, with US crude inventories expanding less than anticipated in the previous week.
The oil market finds itself amidst a complex dynamic, balancing optimistic signals such as reduced OPEC+ output and heightened tensions in the Middle East against persistent worries about Chinese demand, particularly as the nation grapples with economic challenges.
This delicate equilibrium has led oil futures to mirror the oscillations of broader stock markets, underscoring the interconnectedness of global economic factors.
Analysts, including Michael Tran from RBC Capital Markets LLC, highlight the recurring theme of robust oil demand juxtaposed with concerning Chinese macroeconomic data, contributing to market volatility.
Also, recent attacks on commercial shipping in the Red Sea by Houthi militants have added a risk premium to oil futures, reflecting geopolitical uncertainties beyond immediate demand-supply dynamics.
While US crude inventories saw a slight rise, they remain below seasonal averages, indicating some resilience in the market despite prevailing uncertainties.
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