Rising Interest Rates Loom Large Amid Ongoing Oil Price Fears

The threat of rising interest rates is looming large as central banks grapple with the impact of surging oil prices on household budgets and inflation.

Citing concerns over the US-Iran war, the European Central Bank recently raised its benchmark rate to 2.5%, while other major central banks are poised to make key decisions next week, including the US Federal Reserve.

The Fed has held rates steady between 3.5% and 3.75% for five consecutive meetings, but economists at Deutsche Bank predict a rate hike is 'the most likely policy outcome' due to comments from newly-appointed Fed Chair Kevin Warsh, who emphasized slowing price rises as the central bank's focus.

However, Oxford Economics expects rates to remain unchanged, while Yael Selfin, chief economist at KPMG, notes that outside of the US, 'the economic environment has been much weaker' than in 2022 when inflation reached a record high of 11.1% in October.