Oil prices surged while Asian stocks fell on Monday as investors increased bets on a possible US interest rate hike following hawkish remarks from Federal Reserve Chair Kevin Warsh and a renewed escalation in the US Iran conflict.
Persistent inflation, driven in part by elevated energy prices, has increased pressure on the US central bank to keep monetary policy tight. Warsh's refusal to offer clear guidance on the Fed's next move has added to market uncertainty.
Speaking at the closely watched Jackson Hole gathering of central bankers and economists in Wyoming, Warsh signalled that he is prepared to support higher borrowing costs if inflation failed to ease sufficiently.
He described inflation, currently at 3.7 per cent and well above the Fed's two per cent target, as concerning. He also said he would be hard pressed to describe current financial conditions as restrictive, a remark that traders interpreted as a possible indication that further rate increases could be considered.
Source: Channels