This Week's US Fed Rate Hike Likely... Focus on Rising Oil Prices

[Image source=Yonhap News]

[Asia Economy Reporter Kim Hyunjung] Amid growing global market uncertainty due to concerns over the war between Russia and Ukraine, the U.S. Federal Reserve (Fed) is expected to raise interest rates at this week's Federal Open Market Committee (FOMC) regular meeting.

The Fed will hold the FOMC meeting on the 16th (local time) to decide the benchmark interest rate and announce its economic outlook. With the U.S. recording the highest inflation rate in over 40 years, the market anticipates that the Fed's rate hike is inevitable. Considering the global market instability, the rate increase is expected to be around 0.25 percentage points. On the same day, Fed Chair Jerome Powell is scheduled to hold a press conference to discuss the reasons behind the rate hike and future outlook.

Attention is also focused on this week's oil price trends. If the European Union (EU) follows the U.S. in banning crude oil imports, oil prices are expected to rise even more sharply.

Oil prices are trading around $110 per barrel based on West Texas Intermediate (WTI). Due to concerns that oil exports from Russia, one of the world's top three oil producers, will be disrupted, oil prices briefly surpassed $130 per barrel. As oil prices rise, U.S. gasoline prices have exceeded $4 per gallon, reaching record highs. U.S. consumer prices are at their highest level in 40 years.

The International Monetary Fund (IMF) has indicated it will revise downward the new global growth forecast to be released next month. Goldman Sachs recently lowered its U.S. growth forecast for this year and reduced the year-end target for the Standard & Poor's (S&P) 500 index from 4900 to 4700, citing the economic impact of the Ukraine crisis and soaring oil prices. This is the second downgrade in less than a month since the last revision. The new forecast is about 11% higher than last week's closing price.

Additionally, on the 15th, the U.S. February Producer Price Index (PPI) will be released, followed by February export-import price indices and retail sales data on the 16th.

On the 17th, the U.S. weekly initial jobless claims will be announced, along with February industrial production and capacity utilization rates. On the same day, U.S. logistics company FedEx will release its earnings. On the 18th, U.S. February existing home sales and leading economic indicators will be published.