Oil Price Surge Threatens Fed's Rate Hike Pause

A report from ICICI Bank warns that higher oil prices could prompt the US Federal Reserve to resume interest rate hikes later this year if they fuel inflation.

The Fed kept interest rates unchanged at 3.5 per cent-3.75 per cent in its July policy meeting announcement, but three members voted in favour of a rate hike.

According to ICICI Bank, recent geopolitical events pose a major risk to inflation through the oil price channel.

If inflation starts inching up in response to higher oil prices, the Fed could start tightening policy later this year, the report said.