Oil gains momentum following US inflation data

Oil has moved higher following the latest US inflation data released by the US Bureau of Labor Statistics (BLS).

IMAGE: Oil barrels. Getty Images

The US inflation rate, based on the Consumer Price Index for all urban consumers (CPI-U), increased by 0.3% in September, after rising by 0.4% in August.

Oil prices have moved higher following the soft inflation data, as it boosts the likelihood of further interest rate cuts by the US Federal Reserve (Fed) at its upcoming meetings in October and December.

“Inflation, once the villain that dominated every policy headline, has started to fade into the background,” remarked SPI Asset Management managing partner Stephen Innes.

Lower interest rates in the US can support demand growth and make dollar-denominated commodities like oil less expensive for holders of other currencies.

On an annual basis, the US CPI advanced 3% last month, slightly higher than the 2.9% growth seen in August.

Notably, the US central bank remains focused on bringing inflation down to its 2% target.

“The CPI print… was the market’s love letter to the Fed: proof that inflation’s grip is loosening, even if only finger by finger. In a world starved for good news, that was enough,” Innes said.

By Aparupa Mazumder

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