Oil Price Surge May Prompt Fed to Resume Rate Hikes Later This Year

The ICICI Bank report suggests that rising oil prices driven by recent geopolitical tensions could prompt the US Federal Reserve to resume interest rate hikes later this year if they fuel inflation.

According to the report, the Fed has kept interest rates unchanged at 3.5 per cent-3.75 per cent in its July policy meeting announcement, although three members voted in favour of a rate hike.

The report also noted that the Bureau of Economic Analysis is revising the methodology for the Personal Consumption Expenditures (PCE) inflation index, which could potentially give policymakers greater room to keep rates unchanged.