BofA Securities: Sustained Oil Price Increases May Drive Interest Rates Sharply Higher

BlockBeats news, November 6 - Bank of America Securities noted in a research report that if crude oil and refined product prices rise further in the next three to six months, it could lead to "significantly higher interest rates." The U.S. two-year nominal interest rate swap, which reflects market expectations for interest rates over the next two years, has risen by 113 basis points year-to-date.

However, Bank of America pointed out that on trading days when oil prices rose, this rate cumulatively increased by 196 basis points; on other trading days, it cumulatively decreased by 83 basis points. Interest rate volatility in the UK and Germany was even more pronounced.

Bank of America believes that if energy inflation rises, the Federal Reserve may face fewer constraints when considering interest rate hikes. This is because U.S. economic growth and consumer performance are resilient, and the labor market is relatively tight.