Oil Price Drop Lowers Probability of Federal Reserve Rate Hikes
Retail gasoline prices will remain stagnant for the next 14 days and stay below $5.00 per gallon. This stability follows a drop in crude oil prices, which fell over 14% to below $100 a barrel. The price decline stabilized wholesale gasoline costs. These energy costs no longer pose an immediate inflation shock to economic growth. The shift follows a two-week ceasefire between the U.S., Israel, and Iran brokered by Pakistani Prime Minister Shehbaz Sharif and Army Chief Field Marshal Asim Munir. The agreement requires the immediate opening of the Strait of Hormuz, which handles one-fifth of global oil trade. Interest rate futures now price in a 25% chance of a Federal Reserve rate cut by the end of the year and a 56% chance of a 25-basis-point cut by the end of 2026. The probability of a Federal Reserve rate hike has decreased.
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