Attacks on two oil facilities in Saudi Arabia led to a 6% reduction in global oil supply and a 15% oil price spike within days. Saudi Arabian assurances that oil production levels will return to normal within weeks have been greeted sceptically. Meanwhile the Federal Reserve lowered the Fed Funds Rate by 25 basis points following a round of monetary easing by the ECB. Bank of England decided to save its firepower for later.
The BoE’s latest Inflation Report downgraded its growth forecasts but continues to predict “gradual” UK rate hikes assuming a smooth Brexit. In contrast, the Federal Reserve lowered the funds rate 0.25% to 2.25%, its first reduction since 2008. US president Trump’s announcement of a 10% tariff increase on the remaining $300bn of Chinese imports and China’s retaliation adds to global trade concerns, increasing the pressure for further Fed moves soon.
Last week, all eyes and ears were on the US Federal Reserve’s Chair Janet Yellen as markets braced themselves for the first interest rate hike in almost a decade. In a rate decision that was broadly seen by economists as something of a ‘coin toss’, the Fed’s policy-setting committee chose to keep rates on hold at almost 0%. This means that the Fed has yet to increase interest rates from their record lows of 2009.