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Market Tumbles as Fed’s Kashkari Plays Down Rate Cut Hopes, Oil Breaches $90

US stock markets took a nosedive on Thursday, reversing earlier gains. The trigger? Fresh commentary from Federal Reserve Bank of Minneapolis President Neel Kashkari that threw cold water on the anticipation of interest rate cuts in 2024. Adding fuel to the fire, Brent crude oil prices soared, crossing the $90 mark for the first time since October, amid production cuts and rising geopolitical tensions.

During a discussion on LinkedIn, Kashkari voiced skepticism about the need for rate cuts next year, contingent on the trajectory of inflation. If inflation were to hover without significant decline, the Fed might reconsider the widely speculated reductions in borrowing costs. “If we continue to see inflation moving sideways, then that would make me question whether we needed to do those rate cuts at all,” he commented, emphasizing the necessity for inflation to align closer to the Fed’s 2% target before any monetary policy adjustments.

This hawkish stance comes at a time when the job market’s resilience is under the microscope, with jobless claims reaching a two-month peak. Investors and analysts alike are on tenterhooks, awaiting Friday’s release of non-farm payroll and unemployment figures, hoping for insights that might shed light on the employment landscape’s direction.

The unexpected surge in oil prices, courtesy of OPEC+’s strategic production cuts coupled with persistent demand and geopolitical uncertainties, further compounded the market’s woes. As Brent crude breached the $90 barrier, concerns about inflationary pressures and their implications for global economic stability were catapulted back into the spotlight.

Thursday’s market movement underscores the delicate balance central banks navigate in steering monetary policy amid inflationary challenges and economic growth objectives. As investors digest Kashkari’s remarks and brace for the upcoming employment data, the path forward for interest rates—and by extension, the broader economy—remains clouded with uncertainty.