Standard Chartered economists Dan Pan and Steve Englander argue that the recent rise in oil prices is unlikely to produce a 1970s-style stagflation episode in the United States. In their view, the main effect should be a one-off lift to headline inflation, with smaller knock-on effects to core inflation and GDP, while the Federal Reserve keeps policy unchanged as the labour market cools.<\/p>\n
They emphasize that US energy consumption has largely levelled off since the late 2000s, and that energy spending now represents a smaller share of household and business budgets. They also point to a softer labour market over the past two years, with wage pressures easing compared with earlier in the cycle.<\/p>\n
They add that a wider output gap than in 2022 implies more of the shock may come through as lower real wages rather than a sustained rise in inflation. Under their base case using the Fed\u2019s FRBUS model, they estimate headline PCE inflation could reach about 3.1% in Q2.<\/p>\n
They estimate core inflation may stall near 3.0% year over year in the near term before levelling off in Q4. They also see unemployment rising slightly above 4.5%, alongside only a marginally negative effect on growth.<\/p>\n
They note that markets have removed more than 50bps of expected Fed easing for the year and now price a small chance of a rate rise. However, they argue the model implies weaker growth should offset near-term inflation risk, leaving policymakers inclined to wait for clearer evidence before moving.<\/p>\n
The recent oil price surge, in their assessment, is not shaping up to be the kind of stagflationary shock some feared. Even after Brent spiked above $110 a barrel late last year, it has since settled around $95, and the US appears more resilient with energy\u2019s share of consumer spending closer to 4%, versus above 8% during the 1970s shocks.<\/p>\n
They expect the impact to be concentrated in headline inflation with limited spillover into underlying prices. Recent data are presented as consistent with that view, with headline PCE at 2.9% year over year while core PCE held at 2.8%, alongside a softening labour market that is helping contain underlying price pressures.<\/p>\n
Against this backdrop, they see the Federal Reserve remaining on hold, similar to its stance at the most recent meeting. With aggressive rate-cut expectations being pared back but a renewed hiking cycle also looking unlikely, they infer a continued wait-and-see posture from the Fed, and suggest positioning that benefits from lower interest-rate volatility.<\/p>\n
They expect growth effects to remain mild, with unemployment drifting a bit above 4.5% later this year from around 4.3%. In their framing this is a slowdown rather than a recession, implying fears of a major downturn are likely overstated; in markets, they argue this leaves implied equity volatility looking elevated and makes selling VIX futures a potentially favourable trade in the near term.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Standard Chartered says oil-price rise should not trigger US stagflation; inflation bumps once, Fed holds.<\/p>\n","protected":false},"author":103,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-45714","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/45714","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/103"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=45714"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/45714\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=45714"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=45714"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=45714"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}