OIL COLLAPSE TAKING INFLATION PRESSURES OFF FED HIKES



A PUBLIC SOURCED ARTICLE FOR MATASII (SUBSCRIBERS-RESEARCH & PUBLIC ACCESS ) READERS  REFERENCE

MATA: DRIVERS  - INFLATION

MACRO: US MONETARY

11-25-18 - RealInvestmentAdvice.com  Lance Roberts - "Oil Sends A "Crude Warning"



MATASII TAKEAWAYS:

  • Falling oil prices are going to put the Fed in a very tough position in the next couple of months as the expected surge in inflationary pressures, in order to justify higher rates, once again fails to appear.

 


OIL COLLAPSE TAKING INFLATION PRESSURES OFF FED HIKES

Oil prices are a reflection of supply and demand.

Global demand has already been falling for the last several months and oil prices are now waking up that reality.

More importantly, falling oil prices are going to put the Fed in a very tough position in the next couple of months as the expected surge in inflationary pressures, in order to justify higher rates, once again fails to appear.

The chart below shows breakeven 5-year and 10-year inflation rates versus oil prices.

 

Oil prices also tend to lead the broad economic cycle as well. The chart below is one of the broadest measures of economic activity and is comprised of leading economic indicators, Fed regional manufacturing surveys, NFIB small business survey, ISM, CFNAI, and Chicago PMI.

Since most of the economic data we look at is trailing, and subject to heavy negative revisions, the collapse in oil prices suggests that coming economic reports will likely be materially weaker than currently expected.