Global Inflation Angst Is Back on $100 Oil and More Tariffs

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomePMN BusinessGlobal Inflation Angst Is Back on $100 Oil and More TariffsSpiking energy prices, more US tariffs and mushrooming spending on artificial intelligence are reawakening investors’ inflation fears.Author of the article:Craig Stirling, Mark Schroers and Bastian Benrath-Wright You can save this article by registering for free here. Or sign-in if you have an account.A fuel tanker works at a gas station in Miami. Photo by Eva Marie Uzcategui /Bloomberg(Bloomberg) — Spiking energy prices, more US tariffs and mushrooming spending on artificial intelligence are reawakening investors’ inflation fears.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountA week that began with spiraling violence in the Middle East has culminated in oil breaking through $100 a barrel, which will lift costs along global supply chains. Alongside that came a renewed push for trade levies by President Donald Trump and yet more evidence of an untrammeled tech investment boom.That triple whammy of potentially price-stoking phenomena hitting the global economy all at once has arrived at a sensitive time. Just as central bankers were seeing some relief on the inflation outlook, the situation has swung back again.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againWithin decisions looming next week from the Federal Reserve to the Bank of England, officials will need to make swift judgments on the fresh dangers. No immediate interest-rate moves are currently anticipated, but a summer of inflation angst is now looking likely to persist in financial markets. Surging global bond yields are just one symptom of the alarm among investors that consumer prices risk getting out of control. In equity markets, the S&P 500 is on track for a second weekly decline.“Recent events offer a reminder that geopolitics drives the economics, and not the other way around,” said Katharine Neiss, chief European economist at PGIM. “Negative supply shock pressures on headline inflation will continue to underpin central bank tendencies to lean hawkish.”The renewed energy hit follows a widening of the Middle East conflict that has spread from the Strait of Hormuz to the Red Sea. Trump said he’s now considering a “massive attack” on Iran to push the nation to negotiate a peace deal.It’s against that backdrop that crude breached $100 a barrel on Thursday for the first time in two months, and gas prices also surged.The inflation risks, and associated fiscal worries, mean that bonds are tanking. Among the moves, UK gilt yields this week set their longest period of daily closes above 5% in almost two decades. The US 30-year yield is just below the most since 2007. The danger posed by the cost-of-living hit from oil and gas is that its impact on consumers is often so immediate. “The energy shock could intensify further,” European Central Bank President Christine Lagarde warned on Thursday. “The longer energy prices stay high, the more likely they are to drive up broader inflation.”She admitted some colleagues questioned whether they should raise rates immediately, before the ECB then opted to wait. They are ready to do so in September if the inflation outlook doesn’t improve, according to people familiar with the matter.It’s not only oil though. Trump’s administration presented investors with the prospect of renewed tariffs overnight, pledging to collect duties of between 10% and 12.5% on imports from most major trading partners. That’s the biggest move yet to reconstruct a tariff wall struck down by the Supreme Court.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Meanwhile evidence of the huge investment push into AI keeps on coming. On Thursday, Alphabet Inc. raised its capital spending forecast to as much as $205 billion this year.Further fueling some fears is evidence of pricing power among big corporates. Last month, Apple Inc. raised the cost of all Macs, iPads, home devices and the Vision Pro to offset higher inputs caused by an unprecedented shortage of memory chips and storage.Kamakshya Trivedi, chief FX and emerging markets strategist at Goldman Sachs, told Bloomberg Television that he’s more concerned about the energy shock and tech spending than tariffs.“I’m much more worried about the inflationary impulse that’s coming out of the energy complex right now, that’s the one that I think we need to watch,” he said. “The longer term bigger factor here is the AI capex spend, and shifting views there I think are going to be a key driver of the cross market response.”All the renewed inflation considerations will weigh on upcoming deliberations among monetary policy officials across the Group of Seven and elsewhere. The outcome of the Fed meeting arrives on Wednesday, followed by the BOE and Bank of Japan on consecutive days. Japanese policymakers are open to quickening rate hikes, people familiar with the matter said earlier this week. Data on Friday showed the country’s inflation gauge picked up for the first time in three months.In the US, economists continue to expect the next Fed move will be a cut even as financial markets bet on higher borrowing costs. One hike is fully priced in by September.None of the central banks meeting next week will reconvene until the second half of next month, meaning that their messages may set the tone for weeks to come.“While the ECB decided to stay put for now, the pressure to raise rates further in the fall has certainly increased,” said Emanuel Moench, a professor at the Frankfurt School of Finance and a former Bundesbank official. “The Fed will likely also sit tight next week, but the case for rate cuts in the fall has all but evaporated.”(Updates with Fed rate pricing, additional comment from analyst)Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.