Oil price gyrations were a top concern across markets

Ed Mertiri |

U.S. CPI data for February came last week at an eyewatering 7.9% YoY, the highest reading since January 1982 (see chart). This was slightly lower than the whisper numbers, but the markets largely discounted the reading since most of the recent oil and gas increase started in March.

Obviously, oil is going to have impact on inflation for March. One rule of thumb that economists use is that a $10-per-barrel increase in oil prices boosts overall U.S. inflation by 0.2 percentage point. WTI crude, has increased by around $16 a barrel since the start of the Russian invasion (see chart). Prices spiked on Tuesday but dropped sharply later in the week.

It is uncertain how much higher oil prices will increase and how long they will remain elevated. US oil prices are partially dependent as to how quickly the US can find replacement sources for the approximate 8% of oil imported from Russia.

The yield on the benchmark 10-year Treasury notes increased last week reversing the previous week decline closing back above 2%. Yields increase when bond prices drop, indicating selling in the bond market in anticipation of higher rates from inflationary pressures.

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