How will the Federal Reserve react to the inflation record?

Today the dollar index moves in a narrow range around 95,5 pts, stabilizing before the release of US inflation data. Inflation data can help provide fresh clues about the timing and size of a monetary tightening Federal Reserve.

Record inflation prompting the Fed to react stronger?

Last week's statistics, which were released on Friday, showed that non-farm payroll jobs rose by 467 in January, beating expectations and pointing to the limited impact of the coronavirus omicron variant on the US labor market. As a result, chances for a raise interest rates by the Fed in mid-March 2022, they seem to exceed 50% by 20 basis points.

The market valuation may be changed by today's publication on price changes in the US economy in January. According to market consensus, the CPI may rise by 7,3%. compared to January last year. This, in turn, could mark the biggest increase since 1982 and reinforce arguments for a more aggressive Fed stance.

On the other hand Loretta MasterPresident of the Cleveland Fed, dispels speculation about a 50 bp rate hike in March, saying he saw no convincing arguments for such a move and adding that rate hikes after March will depend on how inflation lasts.

Iran will help meet the demand for oil

With inflation, it is impossible not to mention oil. Fuel prices seem to be one of the main factors increasing the level of prices in the economy. WTI crude oil futures appear to be trading close to $ 90 a barrel on Thursday. The publication of the EIA agency showed that US crude oil inventories fell last week by approx. 4,8 million barrels, while the market expected an increase of 369 thousand. barrels.

Crude oil may have recently reached its highest levels since 2014 as the recovery in demand, coupled with dwindling inventories and supply disruptions, may have pushed prices up. Capacity constraints among OPEC members and geopolitical tensions in Eastern Europe are also likely to have contributed to the rise in energy prices.

Growth seems to halt this week as the prospect of a nuclear deal with Iran has become more plausible with the resumption of talks in Vienna. Analysts indicate that Iran could increase production by up to 1,5 million barrels a day, if an agreement is reached allowing the lifting of the sanctions.