Aurelia Butler

U.S. Energy Secretary Jennifer Granholm had signaled to lawmakers late last week that her department could start repurchasing oil for the stockpile soon, after a record sale last year during a spike in prices that pushed the level of the reserve to the lowest since 1983.The new purchase would be for sour crude oil delivered to the Big Hill SPR site in Texas sometime during the month of August, according to the announcement.The Biden administration last year conducted the largest ever sale from the SPR of 180 million barrels, part of a strategy to stabilize soaring oil markets and combat high pump prices in the aftermath of Russia’s invasion of Ukraine. The sale angered Republicans who accused the administration of leaving the U.S. with too thin a supply buffer to adequately respond to a future supply crisis.The sales brought the SPR inventory to around 372 million barrels, the lowest since 1983, amounting to just under 20 days of cover at current U.S. consumption rates.The administration has said it would start to buy oil back into the reserve when prices are consistently at or below $67 to $72 per barrel, well-below the level at which the oil had been sold, so that taxpayers can get some benefit. U.S. crude prices were around $71 a barrel on Monday.Granholm last month had signaled that repurchases would happen closer to the end of the year, after maintenance on two of the reserve’s four sites on the coasts of Texas and Louisiana. More

The Federal Reserve should not be deterred from raising interest rates to battle high inflation because of the potential for financial instability, a top official at the US central bank has said.Thomas Barkin, president of the Federal Reserve Bank of Richmond, said that while policymakers should always be “sensitive” to financial stability, those concerns should not take precedence over the central bank’s fight against persistent inflation.“If inflation persists, or God forbid accelerates, there’s no barrier in my mind to further increases in rates,” he told the Financial Times in an interview on Monday. He noted that he would advocate for a “steady” approach that would “lessen the damage of any potential overcorrection”.He added: “It is not obvious to me that there is a financial stability challenge of having a higher rate path . . . I don’t see the urgency of making a different decision because of financial stability risks.”Barkin’s comments come as the Fed grapples with a number of recent bank failures, prompting worries about a drag on the economy as lenders pull back.The Fed this month raised interest rates for the tenth consecutive time to combat inflation. Jay Powell, the Fed chair, recently hinted that the central bank could consider pausing its monetary tightening campaign as early as June in order to take stock of the economic situation, but he stopped short of ruling out further rate rises.Barkin did not specify his policy preference for the Fed’s next policy meeting, although he said he was now more optimistic that demand across the economy was cooling.“There’s a plausible story that demand is going to come down meaningfully because of waning fiscal stimulus, eroding personal balance sheets, the lagged effects of rate moves, credit tightening, and that cooling in demand will not soon afterwards have a similar effect on inflation,” he said. “I’m still looking to be convinced that story is going to turn into reality.”

Speaking later on Monday with reporters, Raphael Bostic, president of the Atlanta Fed, said he was inclined to support pausing further rate increases next month.“I’m expecting inflation to continue its steady decline [but] I don’t think it’s going to be a very fast decline, and that is one of the reasons why I want to wait and see and get a sense of how quickly the economy is responding,” Bostic said. Barkin, speaking of economic data, said he “can’t find anything in the recent inflation reports that make me think we’ve gotten to where we need to get”. He also said that “at best” the labour market had moved from “red hot to hot”.It was both easy to imagine data published over the next month that suggests “waiting [to further raise interest rates] is a really good thing to do” as well as those that would suggest “you just can’t afford to wait”, Barkin said.The Richmond Fed president said he was closely watching credit conditions, as they could influence consumer spending, small business activity and commercial real estate on the “margin”. He was also paying attention to political negotiations over the federal debt ceiling, on account of market turmoil that could follow a US debt default.“It’s definitely a place I don’t have a lot of interest in going,” Barkin said. More

The Bank of England’s chief economist said on Monday that he regretted blaming others for high inflation and for saying Britons “need to accept” they are poorer, but repeated that companies and households could not avoid being hit hard by higher energy prices. Huw Pill generated what he described as a “viral response” last month when he said that in the UK “someone needs to accept that they’re worse off and stop trying to maintain their real spending power”. In a webcast from the BoE on Monday, Pill said he regretted his choice of language. “If I had the chance again to use different words, I would use somewhat different words,” Pill said. “I don’t think the viral response has been very helpful for our communications.”Pill said he recognised that the poorest families and smaller businesses had been hit hardest by the cost of living crisis over the past year and inflation rising to double-digits for more than six months, busting 40-year highs.“I don’t think we’re looking to blame others [for the rise in inflation],” Pill said, and went on to explain why households and companies could not escape becoming poorer when natural gas prices rise. The chief economist said he would try to bring “difficult messages . . . in a way that is less inflammatory than maybe I managed in the past,” adding that it was “important” to deliver such messages. He said he believed inflationary challenges should be addressed in a “coherent and robust way”.

Pill said that when the price of wholesale natural gas rose, it inevitably meant that national income would be hit, hurting households and businesses outside the energy sector. “That’s going to squeeze your spending power on everything else,” he added. The BoE’s challenge, he said, was how to respond to the squeeze on incomes and the rise in inflation when it knew the effect of interest rate rises took time to filter through to the wider economy.The biggest problem faced by the central bank, he noted, was an “incompatibility of a smaller pie for everyone” with households and companies “trying to maintain their level of spending before the pie shrunk”.That was generating “more persistent, self-sustaining momentum in inflation” which would continue keeping the bank from achieving its 2 per cent inflation target “even as the initial rise in gas prices drops out”, he said.Pill recognised that rising interest rates would intensify the squeeze on many households and companies finances but said “monetary policy is a very powerful tool, but a blunt tool” and it was necessary to slow spending to bring it into line with the worse economic outlook and higher gas prices.The reason this was necessary, he said, was to stop inflation becoming stuck at 4 to 5 per cent rather than falling back to the BoE’s 2 per cent target. “It’s precisely that that we want to avoid, because if inflation gets stuck at that [4 to 5 per cent] type of level, it will tend to carry on for a very long time.” More