Federal Reserve Hikes Rates Amid Rising Fuel Prices

The US Federal Reserve raised interest rates last week to 3.75-4%, citing fuel prices as a key factor in their decision. Fed Chairman Kevin Warsh said, 'We cannot affect any individual price... But what we can do, and will do, is ensure that any change in relative prices don't broaden out.'

Despite the recent surge in oil prices, which have risen from around $60 per barrel to over $100 per barrel this year, global growth remains stable. However, Wood Mackenzie analysts warn that if there's no agreement to resolve the conflict in the Middle East, oil prices are likely to continue rising.

Wood Mackenzie forecasts Brent crude will reach $125 per barrel by October. This could have a significant impact on the US economy, with up to two-thirds of GDP growth driven by AI-related capital spending. If this investment boom were to deflate, it could tip the US economy into recession.