As the market starts counting backwards till June 12th, where the first rate cut should happen, the oil market keeps pushing inflation away form the 2% target. As you can see in the chart below, Crude oil has gone up 17% YTD, and OPEC is committed to keeping production cuts to support higher prices. Additionally, geopolitical tensions and the inability to use the efficient routes through the Suez Canal and Panama Canal, is contributing to the price increase. Energy weights 22% on the CPI, which includes other items aside from oil, but the important part is that there are also second order effects of oil on the rest of the items in the CPI basket, due to transportation, manufacturing, etc. We might see a stubbornly strong inflation report over the next few months.
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