Saudi-Jordanian Business Council Recommends Boosting Economic Cooperation

Oil prices rose more than 2% after a fresh flare-up in the US-Iran war, adding pressure to the Federal Reserve as investors weighed the possibility of higher interest rates.

At the Jackson Hole symposium in Wyoming, Federal Reserve official Kevin Warsh said US inflation had reached 3.7%, nearly double the central bank’s 2% target. He called the increase “concerning” and said he would be “hard-pressed” to describe current financial conditions as restrictive.

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We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do.

Warsh stopped short of signaling a rate increase, saying, “I stand here today committed to a discipline, not to a decision.” His comments nevertheless pushed up expectations for tighter policy. US stocks fell across all three major indexes on Friday, short-term Treasury yields rose, the dollar strengthened and gold declined.

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I stand here today committed to a discipline, not to a decision.

Asian markets posted mixed results, with Tokyo, Hong Kong, Sydney, Taipei, Jakarta and Mumbai closing lower, while Seoul, Shanghai, Singapore, Bangkok and Wellington gained. Paris rose, Frankfurt slipped and London remained closed for a holiday.

Markets will focus on US employment data this week and the consumer price index next week. Analysts said those reports would help determine whether a rate increase is likely, although Invesco’s David Chao said he did not expect a September move. Higher oil prices have complicated the Fed’s inflation fight after the United States said it attacked Iranian rocket launchers on an island in the Strait of Hormuz.

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While Jackson Hole has increased the possibility of a rate hike, I don't think a September rate hike is in the books.