Interest rates, OPEC and Ukraine could slow down the Fed and ECB on rates
It seems clear, finally, that the severe policies of the Fed and ECB regarding the reduction of rates are starting to ease and the first cuts are imminent. But there are two realities that could slow down these decisions. They are called OPEC and Ukraine. Both revolve around oil and above all its prices which are immediately reflected in the global index. Index that is constantly monitored by central banks.
The Organization of the Petroleum Exporting Countries (OPEC) is voluntarily acting on repeated production cuts and this is immediately translates into increases in the “artificial and speculative” price of crude oil. The other element that could slow down the decisions of the Fed and the ECB is represented by the continuous attacks by Ukrainian drones against Russian refineries. It is worth remembering that Russia continues to represent a leading player in the world energy market. Perhaps no longer for Europe but for the rest of the world which is buying from Russia, first of all China.
Interest rates, every increase in Brent affects the Eurozone
This sword of Damocles, there is no point in denying it, exists. With the sole exception of Canada, the United States and Norway, black gold is solidly in the hands of the Middle East and Latin America and its OPEC cartel. And the eurozone is undoubtedly the part most affected by any price increase. In just over ninety days, Brent rose by 20%. A price still far from last year’s 100 dollars but, certainly, a worrying indicator of growth in a period in which the trend was downwards. Now, despite the drops in electricity and gas, oil is influencing the consumer price index at a delicate moment in bankers’ choices.
Interest rates, the greatest impacts of Brent growth on motorists and transport
Motorists, public transport, planes and buses are heavily affected by these increases and, clearly, pass on the greater costs to the final consumer. Food prices are also moving upwards as a result. Just think of the cost of chocolate which has led to price increases of Easter eggs starting from 30% more than last year. In short, the ghost of inflation, not yet completely overcome, continues to animate debates in the halls of world politics between hawks and moderates.
The former ready to keep rates high, the latter to push to speed up the reductions. In this sea of concern some more optimistic voices also emerge. Several observers expect Brent to be at “still high levels” in the second half of 2024, “but without exceeding $90 per barrel in a lasting way”. This will allow the ECB and Fed to begin their bearish rate strategy. For the price of crude oil to be reflected in inflation and rate decisions, it would have to rise above $100 again. And this danger seems, at least for the moment, averted.