Crude oil price may slump as the Federal Reserve upgraded its outlook for the 2017 interest rate hike path as the policymakers now expect to raise the benchmark lending rate three times next year, up from a pair of increases projected in September.
Chair Yellen did her utmost to play down the change, saying only handful of FOMC officials taking into account the highly uncertain effects of future fiscal policy were responsible for the upward drift in central bank’s average view. The forex markets paid little heed however.
Yields soared alongside the US Dollar, undermining demand for non-interest-bearing and anti-fiat assets, sinking precious metals noting that the crude oil prices declining as the greenback’s gains applied de-facto selling pressure to the USD-denominated WTI benchmark.
Looking ahead, November’s US CPI report headlines the data docket. Expectations call for the baseline inflation rate to rise to a 25-month high at 1.7 percent. An upbeat print in line with a recent string of upside surprises may fuel further steepening of the priced-in tightening path, punishing commodities.