Oil prices may give Fed dilemma

RISING oil prices will force the US Federal Reserve into a dilemma over interest rates if the current trend persists.

Ulster Bank Markets' economist Niall Dunne said that by linking Tuesday's 0.25% rate hike to oil prices, the Fed has unwittingly suggested that if oil prices go higher, it will put further interest rate increases on hold.

That, however, has implications for inflation and, by linking the slow down in the economy in the last quarter to the oil situation, the US Federal Reserve has created unnecessary uncertainty about its future interest rate policy, Mr Dunne said.