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2026-09-16 21:02:12
[Strategists Turn to Inflation Concerns, Warning of Potential More Aggressive Fed Rate Hikes] ⑴ Some global strategists previously advocated for the Fed to hold rates steady, citing reasons including the core consumer price index remaining around 2% for the past three years and the offsetting effect of slowing wage inflation and productivity growth on commodity prices. ⑵ Now, their stance has clearly shifted, with concerns about the short-term inflation outlook. The core trigger is the widening divergence between crude oil and refined product prices. ⑶ Although West Texas Intermediate (WTI) crude and Brent crude remain above $100 per barrel, the gasoline, diesel, and jet fuel markets are experiencing an environment of extreme price scarcity, with refined product prices and crack spreads rising to unprecedented levels relative to crude oil. ⑷ The head of commodity research at the firm pointed out that the current divergence between crude oil and refined product pricing is unprecedented, with retail gasoline prices corresponding to crude oil levels far exceeding current actual oil prices, and diesel and heating oil prices also significantly deviating from normal levels. ⑸ The main reasons for this divergence include damage to oil infrastructure in the Middle East and Russia, and abnormally low inventories that should be at seasonal highs, with diesel inventories falling to a near 30-year low. (6) The strategist believes that if the related conflicts cannot be resolved quickly, refined oil prices may jump further due to excessively high crack spread margins. (7) It also mentions that retail, wholesale, and residential construction sectors may use the crisis to drive profit-driven price increases. If this continues, any increase in refined oil crack spreads could be passed on to consumers, while moderate labor costs will continue to translate into expanded profit margins. (8) If the aforementioned price increases take hold, the Federal Reserve may ultimately have to raise interest rates at a much more aggressive pace than previously expected.
