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Oil Falls after US Fed Governor Says No Rush to Cut Interest Rates

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Oil Falls after US Fed Governor Says No Rush to Cut Interest Rates

Oil prices fell on Friday after a US Fed official said interest rate cuts should be delayed at least two more months, but indications of healthy demand and concerns over supplies could boost prices in the coming days.
Brent crude futures were down 38 cents, or 0.5%, at $83.29 a barrel at 0524 GMT, while US West Texas Intermediate crude futures were 40 cents, or 0.5%, lower at $78.21, Reuters said.
US Federal Reserve policymakers should delay interest rate cuts by at least another couple of months to see if a recent uptick in inflation signals stalling progress toward price stability or is just a bump in the road, Fed Governor Christopher Waller said on Thursday.
Higher interest rates for longer slow economic growth, which could curb oil demand in the world's largest oil consumer. But some analysts say demand has remained largely healthy, including in the US.
Analysts at ANZ research said US crude oil inventories rose at a less-than-expected rate last week, while run rates at refineries ended a streak of declines and may increase in coming weeks.
JPMorgan's high frequency demand indicators are showing oil demand rising 1.7 mbd month-over-month through February 21, its analysts said in a note on Friday.
"This compares to 1.6 mbd increase observed during the prior week, likely benefitting from increased travel demand in China and Europe," the analysts said.
Oil benchmarks pared some of their Thursday gains after Waller's comments.
The US central bank has held its policy rate steady in the 5.25%-5.5% range since last July, and minutes of its policy meeting last month show most central bankers were worried about moving too quickly to ease policy.
Waller also pushed back on the idea that the Fed risks sending the economy into recession if it waits too long to cut rates, saying the Fed can afford to "wait a little longer".
Oil futures had settled higher on Thursday as hostilities continued in the Red Sea, with Iran-aligned Houthis stepping up attacks near Yemen to show support for Palestinians in the Gaza war.
Israel Prime Minister Benjamin Netanyahu's war cabinet has approved sending negotiators to truce talks taking place in Paris on Friday as pressure mounts in the Middle East, according to a source briefed on the matter and Israeli media.

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Urgent Financial Tasks Await Lebanon’s Emerging Government

Lebanese President Joseph Aoun stands between Speaker of Parliament Nabih Berri and caretaker Prime Minister Najib Mikati (dpa)
Lebanese President Joseph Aoun stands between Speaker of Parliament Nabih Berri and caretaker Prime Minister Najib Mikati (dpa)
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Urgent Financial Tasks Await Lebanon’s Emerging Government

Lebanese President Joseph Aoun stands between Speaker of Parliament Nabih Berri and caretaker Prime Minister Najib Mikati (dpa)
Lebanese President Joseph Aoun stands between Speaker of Parliament Nabih Berri and caretaker Prime Minister Najib Mikati (dpa)

A broad internal consensus, encompassing both political and economic dimensions, is taking shape to adopt the principles outlined in the presidential inauguration address as the foundation of the new government’s program and ministerial statement. This approach aims to sustain Lebanon’s immediate and strong positive momentum, which is reinforced by widespread support on both Arab and international levels.

Economic bodies and professional unions representing business sectors have openly expressed their relief and full support for the strategic directions set by President Joseph Aoun following his election. However, they have made it clear that maintaining this positive momentum depends on the formation of a reform-oriented rescue government, composed of competent, experienced, and honest ministers. This government must also collaborate constructively with the president.

According to a senior financial official, the rescue mission will be challenging due to years of governmental inaction and constitutional voids, which led to a deterioration in public sector operations and the accumulation of economic, financial, and monetary crises over the past five years. These challenges were further compounded by a devastating war, which inflicted severe human and financial losses estimated at approximately $10 billion, thereby worsening the country’s financial gap, now estimated at $72 billion.

Economic and banking circles are looking to the new government to swiftly capitalize on extensive international support by restoring trust and reestablishing financial channels between Lebanon and its regional and international partners. Key to this effort are explicit and transparent commitments to combating illegal economic activities, corruption, smuggling, money laundering, and drug trafficking. In parallel, the government must prioritize strengthening judicial independence and implementing strict controls over land, sea, and air borders.

The national consensus evident in the presidential election, according to Mohammad Choucair, head of Lebanon’s economic associations, paves the way for constructive collaboration among political factions. This collaboration is crucial for addressing challenges, rebuilding the state, and benefiting from renewed international and Arab—particularly Gulf and Saudi—interest in Lebanon. Choucair emphasized the importance of normalizing relations with Gulf nations, supporting Lebanon’s recovery, and providing resources for reconstruction efforts.

One of the urgent tasks for the new government, according to the financial official, is revisiting the draft 2024 state budget, which was previously submitted to parliament. Adjustments are necessary to address fundamental discrepancies in expenditure and revenue projections, taking into account significant changes brought about by the Israeli war.

Ibrahim Kanaan, chairman of the Parliamentary Finance Committee, described the budget as “unrealistic, if not entirely fictitious,” particularly in its revenue estimates. He pointed out that revenue increases were based on income and capital taxes, internal duties, and trade-related fees, all of which have been severely impacted by the war.

Reassuring depositors, both domestic and expatriate, who have suffered massive losses over recent years, is another pressing issue. These losses were exacerbated by the inability of successive governments to implement a comprehensive rescue plan addressing the $72 billion financial gap fairly. The situation was worsened by mismanagement in the electricity sector and the squandering of over $20 billion in central bank reserves following the onset of the financial crisis.

In response to Aoun’s commitment to a fair resolution for depositors, the Association of Banks in Lebanon welcomed his emphasis on safeguarding deposits. It also expressed its readiness to collaborate with the central bank and the government to protect depositors’ rights, citing a recent State Council ruling that prohibits any financial recovery plans from including measures that would erode depositors’ funds.

In its final session, the caretaker government addressed long-standing creditor issues by unanimously agreeing to suspend Lebanon’s right to invoke statutes of limitations on claims by foreign bondholders under New York law. This suspension, effective until March 9, 2028, aims to facilitate future negotiations.

With this decision, the caretaker government tacitly acknowledged Lebanon’s pending debt obligations, including over $10 billion in suspended interest payments on Eurobonds and approximately $30 billion in principal debt. The resolution now awaits direct negotiations under the new administration, which faces the challenge of resolving a nearly five-year-old crisis triggered by the previous government’s uncoordinated decision to halt payments on all Eurobond obligations through 2037.

Caretaker Finance Minister Youssef Khalil emphasized that despite the difficult circumstances, “Lebanon remains committed to reaching a fair and consensual resolution regarding the restructuring of Eurobond debt.”