The Fed shocked financial markets throughout last week, after raising the discount rate by 0.75%; thus, increasing expectations that the fed will be the first central bank to stop non-standard policies that it provided throughout the credit crisis, subsequent to recovery signs that it has been showing since the beginning of this year.
Due to the Fed discount rate increase, markets expected a similar step to follow and for them to raise the benchmark interest rate, the Feds Funds Rate; nonetheless, the Feds reiterated their stance regarding warranted low rates at this time which is expected to be highlighted by Bernanke in his address to the Congress this week, which eased markets fears over tightening maneuvers.
Meanwhile, consumer prices receded in the U.S. throughout January to record 0.2%, where core prices fell by 0.1%. Due to this month's first drop in the index since December 1982, consumer prices depreciated dispersing inflationary pressures, thereby supporting expectations of the benchmark interest rate to linger at the current record low range of 0.0 – 0.25%.
Also supporting low rates is the elevated jobless rate which stands at 9.7%, a clear testimony of the softness in the U.S. economy, fueling low consumption levels which already resemble 2/3 of the GDP.
Dear reader, we still witness economic improvement that point to the start of the recovery from the recession, but at the same time we will witness several obstacles that are expected to stand as a barrier ahead of this long journey to normality and expansion once again.
The S&P GSCI index closed last Friday at 521.98, higher by 3.42; whereas the RJ/CRB commodity index also recorded gains of 1.65 to close at 277.00.
In NYMEX as of 03:15 EST; heating oil futures rose to record $208.97 per gallon by $1.800; motor gasoline is trading around $210.000 per gallon after inclining by $1.430; meanwhile, natural gas declined by $0.081 to record $4.963 per 1000 cubic feet. In London, Brent gained by $0.250 to record $78.440.
Crude opened today at $80.40 per barrel, recording highs at $80.75 and lows of $79.95 per barrel, while presently trading around $79.95 per barrel.