Some economic observers are taking the slight rise in oil prices as a sign that inflation may be grinding down and the Fed will start making benchmark interest rate cuts in a matter of months, according to a report by Reuters:
“Crude prices edged up on Thursday after data showed a stabilizing U.S. job market, fueling expectations that the Federal Reserve could begin to cut interest rates in autumn, which should stimulate the economy and boost oil demand.
“Brent crude futures settled 52 cents, or 0.6%, higher at $83.27 a barrel, while U.S. West Texas Intermediate crude (WTI) ended at $79.23, up 60 cents, or 0.8%.
“The number of Americans filing new claims for unemployment benefits fell last week, pointing to an underlying strength in the labor market.
“‘Even though the jobless claims were low, the report was weak enough that it’s going to allow the Fed to get in and cut,’ said John Kilduff of Again Capital. ‘The strong employment trends do portend strong gasoline demand as we look out, even though it has been lackluster.’
“Wednesday’s slower-than-expected U.S. inflation data for April also fed market expectations for a September cut in interest rates, which could temper dollar strength and make greenback-denominated oil more affordable for holders of other currencies.”
To read the entire article by Reuters, please click HERE.