Fed Official Says Oil Prices Will Keep Inflation Above Target

Mintesinot Nigussie

St. Louis Federal Reserve President Alberto Musalem has said higher oil prices are likely to keep US inflation above the central bank’s 2 percent target through the end of the year, reinforcing expectations that interest rates will remain on hold for an extended period.

Musalem said underlying inflation could finish the year at around 3 percent, with risks tilted higher if energy costs remain elevated and continue feeding into broader price pressures across the economy.

“It’s likely we’re going to see some pass-through of oil prices onto core inflation,” he said, adding that the measure could end the year “a shade below 3, maybe around 3” percent.

Brent crude has risen to about 95 US dollars a barrel from roughly 70 US dollars before the escalation of conflict in the Middle East. The increase has pushed up fuel, transport and shipping costs, with knock-on effects across supply chains.

The shift in energy markets has already influenced expectations for monetary policy, with investors increasingly betting that the Federal Reserve will extend its pause on interest rate cuts as it assesses the inflationary impact.

Overall, the Fed official’s comments highlight the persistent inflationary pressure from higher oil prices and suggest that interest rates are likely to remain unchanged for some time.