Geopolitical tensions have raised the price of gasoline futures in both the United States and Europe. Between May 30 and June 17, futures increased by 10.2% in the U.S. and by 16% in Europe.
That increase is leading to higher petrol prices across the two major global economies, which will eat into real income at a time when global economic activity is slowing.
This move will almost certainly move energy prices to the forefront of central bank risk matrices. It is almost inconceivable that Federal Reserve Chair Jerome Powell will not be asked about emerging risks to the economic and inflation outlook linked to real-time events like these in the external sector.
Intensifying security tensions are likely to drive oil prices higher should they not abate in the near term, which would affect the Federal Reserve and European Central Bank as they set their policy rates.
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