Oil prices dropped around 3% along with other major commodities as fears of a global economic slowdown grew in response to Federal Reserve Chair Jerome Powell’s warning that the United States could enter a recession.
As of 10.42 hrs. local time in Thailand, Brent crude futures fell US$2.45, or 2.2%, to settle at US$109.29 a barrel. The global benchmark hit a session low of US$107.03, its lowest since May 19.
U.S. West Texas Intermediate (WTI) fell US$2.74, or 2.6%, to settle at US$103.47 a barrel. The session low was US$101.53, its lowest since May 11.
The Federal Reserve Chairman Jerome Powell told the congressional lawmakers yesterday (22 June) that the central bank was committed to bringing inflation down, but added that it would be difficult to achieve a soft landing.
“At the Fed, we understand the hardship high inflation is causing. We are strongly committed to bringing inflation back down, and we are moving expeditiously to do so,” said Powell to the congressional lawmakers. “We have both the tools we need and the resolve it will take to restore price stability on behalf of American families and businesses.”
Still, the Fed’s chair acknowledged that a recession could happen even though the U.S. economy is strong now in his view.
The Fed has raised interest rates three times since March and has indicated that it would continue for the remainder of the year. Powell stated that central bank officials “anticipate that ongoing rate increases will be appropriate.”
In the meantime, U.S. President Joe Biden urged Congress to suspend the federal gasoline tax for three months to help combat record pump prices and bring temporary relief to American consumers this summer.