Oil Prices Crater as Experts Question Whether Fed Should Continue Rate Hikes to ’Fix’ Volatile Economy on Biden’s Watch

Oil prices lost much of the gains that have been made since Russia invaded Ukraine in late February. Crude oil fell below 100 on Tuesday. Other commodities have also been tumbling since the rate hike in June.

According to CME Group’s FedWatch, there is still a 90.3% odds of a 75-basis-point hike on July 27 bringing rates to a range of 2.25%-2.5%.

There are many signs in the economy that we may be headed into a recession. The U.S. economy shows signs of slowing, the Atlanta Fed’s GDPNow the latest estimates show a second-quarter decline in GDP of 2.1%, with the next estimate to be released on Thursday, July 7th.

The Treasury market shows signs of a looming recession with the 10-year Treasury yield falling from 3.48% on June 14th to 2.88%. With an inverted yield curve this typically indicates a precursor of a recession, as the 2-year yield has risen to 2.91%.

On Friday, we will get the jobs report and current estimates are that there will be a decline from 400,000 per month to 270,000. Economists anticipate the unemployment rate will remain unchanged at 3.6%.

Meanwhile, the Federal Reserve indicates that a .75 point rate hike may be likely, but will be decided meeting by meeting. Wells Fargo CEO Charles Scharf expressed last week that the economy is not prepared for the hike.

Scharf Said, The fed has been “very clear about how they’re going to think about what the right movements are going to be.”

“They’ve done as they started this what they said they were going to do, and they’ve been very clear that they intend for it to continue.”

He then brought up the effect on the broader economy, “We know rates are going up, it couldn’t be clearer. We know that consumers and businesses, while strong today, are going to see deterioration, and we’re going to act surprised when it happens.”

“That doesn’t mean the world is coming to an end, we should do our best to recognize that and focus on what the solutions are.”

Scharf concluded his comments with a positive note, “We’re going into this stronger than we’ve ever been. We’ve got the legislators, regulators, the Fed, who have extraordinary conviction, who have extraordinary tools, and that makes me feel pretty good about our ability to get through something.”

The fed has been very clear they are more than likely to continue with the rate hikes regardless of the criticism.

We are not financial experts and this article is not to be taken as financial advice. Seek an investment professional before making any investments.