The price of oil and gas has increased rapidly in the last two months. The increase in energy has a direct impact on inflation at a time when more and more forecasts are showing that The European Central Bank (ECB) and the United States Federal Reserve (Fed) will stop raising rates.
right, the price of Brent oil, the European reference variant, chain four consecutive months of increase. Since the lows of the year – marked in March and around $ 70 per barrel – the revaluation has been around 23% due to the cuts in OPEC + member countries.
As a result of this rise, crude oil came from the Old Continent more than 90 dollars per barrel, something that hasn’t happened since last November.
The latest increase, driven by the decision of Russia and Saudi Arabia to extend their production cuts, has “revived inflationary fears” and clouded growth prospects, especially in Europe,” they told Edmond de Rothschild AM.
The behavior of American West Texas, whose price is around $88, is the same. But it’s not just the price of oil that has gone up. Natural gases have done this as well.
From oil to gas
In this case, the rebound is explained by the strike by Chevron energy workers at two Australian plants Wheatstone and Gorgon, which in 2022 will supply 7% of global liquefied gas in 2022. Stoppages, only partial, may be extended from September 14, and may last up to 24 hours, if in the coming days not they agree. arrived.
Therefore, the price of gas in TTF is again approaching the level of 40 euros per megawatt hour (euros/Mwh). So, The price of this raw material increased by 57% since June it has set the annual minimum of 23 euros.
Inflation
Due to rising energy prices, Annual inflation rate in the euro zone remained stable in August at 5.3%. Even if the lowest rate since January 2022 was repeated, it would mean ending a streak of nine consecutive declines.
Excluding the impact of energy from the calculation, the year-on-year inflation rate in the euro zone in August stood at 6.3%, compared to 6.7% in the previous month. Excluding the impact of food, alcohol and tobacco prices, the core inflation rate fell to 5.3% from 5.5%, the lowest level since May.
(Europe fears about electricity bills this winter due to constantly fluctuating gas prices)
“The rise in oil prices and inflation that will not decrease as expected should mean less consensus at the next ECB meeting,” believes Edmond de Rothschild AM.
The appointment will take place this Thursday. And of this, some of the members of its Governing Council may be “tempted to push for one last rate hike even as the economy slows“, said the same experts.
(Lagarde (ECB) pointed out that there are still more rate hikes: “We want to prevent inflation”)
In this way, and as pointed out by DWS, “the latest inflation data, which is likely to surprise at the top, has become food for falcons“, members are in favor of a tighter monetary policy.
On the contrary, “the latest economic figures, disappointing in Europe and on a global scale, are food for pigeons”, as the members in favor of a more accommodative monetary policy know -an.
Growth retardation
Faced with the latest inflation data, PMI indices – key indicators of economic health – showed a slowdown in growth in Europe and the United States in August.
“This situation should prompt the ECB to reassess the risks and may lead to a halt in interest rate hikes, at least temporarily. This translates into uncertainty in the market about the possibility of a final rate increase of 25 basis points by the central bank before the end of the year,” they believe in La Française.
(Powell, in Jackson Hole: “The Federal Reserve is ready to raise interest rates more if necessary”)
When the Fed meets on September 20, it will too US inflation data for August. They will be known this Wednesday and forecasts point to a rebound in the general rate (up to 3.6%, four tenths more than last month) due to the energy effect.
The overall inflation rate in the US has increased in July. It did so by two tenths, up to 3.2%, and this increase was the first after thirteen months of moderations.
Despite the possible rise in prices, and in the face of doubts that the market has about the ECB, Investors give only a 7% chance that the Fed will raise interest rates by 25 basis points at your next meeting. Likewise, expectations of cuts in 2024 have been reduced.
“In the United States, although growth is stronger, leading indicators also suggest a slowdown, but in the most controlled inflation and core inflation, excluding the real estate sector, which is approaching the 2% target. Therefore, the Federal Reserve can be more patient “than the ECB, they emphasized in La Française.
