Opec Cut's Clouds Fed Direction to Battle Inflation

Opec’s decision to increase voluntary cuts Sunday could make the Fed’s job of lowering inflation more challenging according to Federal Reserve Bank of St. Louis President James Bullard.

• “Oil prices fluctuate around. It’s hard to track exactly. Some of that might feed into inflation and make our job a little bit more difficult,” he said.
• “I would’ve expected somewhat higher oil prices anyway with China coming back sooner than expected during the first half of 2023 and with Europe skirting recession,” he said. “And strong data in the US, all of those are are pretty bullish factors for the oil market.” he added.
• The Biden administration has few options to tackle Opec’s cut decision having used up a significant portion of its SPR last year to try and keep a lid on rising prices after the Russian invasion of Ukraine.
• Biden urged Gulf producers to increase production last year to help temper rising prices which was refused. The latest cut adds a further blow and highlights a lack of alliance between Saudi and the US.