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Can We Keep Up? Inflation Beats Market Expectations, Bank of Canada Raises Interest Rates & Oil Inventories Send Prices Lower

U.S Inflation surges to 40-year high

Consumer prices in the U.S. rose to a forty year high on Wednesday, beating market expectations.

Figures released by the Bureau of Labor Statistics showed that inflation rose to an annualised rate of 9.1% in June.

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Energy prices rose 41.6%, the most since April 1980, boosted by gasoline (59.9%, the largest increase since March 1980), fuel oil (98.5%), electricity (13.7%, the largest increase since April 2006), and natural gas (38.4%, the largest increase since October 2005). Food costs surged 10.4%, the most since February 1981, with food at home jumping 12.2%, the most since April 1979. Prices also increased significantly for shelter (5.6%, the most since February 1991), household furnishings and operations (9.5%), new vehicles (11.4%), used cars and trucks (1.7%), and airline fares (34.1%). Core CPI which excludes food and energy increased 5.9%, slightly below 6% in May, but above forecasts of 5.7%. 
source: U.S. Bureau of Labor Statistics

In addition to this, inflation rose by 1.3% from May, which is the biggest increase since 2005.

Markets were volatile on the news, with Gold dropping to an eleven month low, whilst the S&P 500 was also lower.

Bank of Canada surprise markets, following 100 basis point rate hike

The Bank of Canada surprised markets on Wednesday, opting to hike rates by 100 basis points.

As a result of this, interest rates in Canada are now at 2.5% following on from last month’s 1.5% figure.

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In a statement that preceded the hike, the bank stated that, “With the economy clearly in excess demand, inflation high and broadening, and more businesses and consumers expecting high inflation to persist for longer, the Governing Council decided to front-load the path to higher interest rates by raising the policy rate by 100 basis points today”.

USDCAD fell to a low of 1.2936 of the news.

Oil prices fall to 3-month low, following rise in crude inventories

WTI crude fell to a three month low on Wednesday, following an increase in oil inventories.

Figures released by the Energy Information Administration reported that inventories rose by 3.254 million barrels last week.

This comes as markets had projected a draw of 0.154 million barrels for the same period, following on from a build of 8 million barrels the week prior.

As of writing this, WTI is trading at $96 per barrel, which is close to its lowest point since April.

“The goal of a successful trader is to make the best trades. Money is secondary.”

-Alexander Elder.

Eliman Dambell

Senior Market Analyst