Rising oil costs put the Fed in a troublesome place amid inflation
Oil prices rose Tuesday, which created a difficult position for the head of the Federal Reserve ahead of Wednesday’s meeting, CNBC’s Jim Cramer said.
“The rising price of crude oil … makes life difficult for Fed chief Jay Powell,” said Cramer on “Mad Money”. “While many other commodities have actually fallen now, and some have fallen steeply in the past few weeks, oil just keeps going up.”
The comments come after major averages fell in the Tuesday session leading up to the Fed’s monetary policy meeting. A Wall Street that keeps an eye on rising consumer prices will watch Powell be “tormented” with inflation questions at the press conference, Cramer said.
Traders watch for signs that the Fed is changing its inflationary course and adjusting its plans to reduce the throttling.
“Oil is too bad a negative for the press to ignore, and I’ll bet he’ll say at some point that he’s monitoring it,” which means selling, Cramer said.
Powell said he was ready to let inflation, which shot up 5% in May, run a little higher than in recent years before taking action to hike rates. The Fed has announced that it will allow the U.S. economy and labor market to fully recover from the Covid-19 downturn before dampening inflation, and claims it will be temporary.
“Tomorrow, when the Fed makes its statement at 2pm, I don’t expect any big changes in language, but the stock market says that oil leadership is so evident that crude will clearly go higher, and that means that the Fed needs to change. ” of course, “said Cramer.
“The dirty little secret here is that higher interest rates do nothing to create more oil, but you will never hear that from the ‘inflationistas’,” he added.