This article was written on 21 October 2026; the data is current as at 20 October 2026. The dates of the two Federal Reserve meetings mentioned in the article—27–28 October and 8–9 December—are subject to the calendar in effect at the time of publication.
Soaring oil prices, virtually stagnant employment, and a Federal Reserve that is still raising interest rates
Let’s look at three things first.
Firstly: Brent crude is currently trading at US$109 per barrel. Following military action against Iran by the US and Israel at the start of the year, oil prices have risen steadily; in September, US petrol prices rose by 34.2 per cent year-on-year.
Secondly: US non-farm payrolls rose by just 29,000 in September. By comparison, the figure for August was 133,000. The unemployment rate, meanwhile, rose to 4.2 per cent.
Thirdly: The Federal Reserve raised interest rates just last month, bringing the federal funds rate to 3.75 per cent–4.00 per cent, and the market is still betting on another hike in December, with the probability having been priced in at as high as 94 per cent at its peak.
With these three things happening at the same time, something just doesn’t seem quite right. Prices are rising, jobs are becoming scarcer, and the central bank, far from rescuing the economy, is actually slamming on the brakes?
If you find this unreasonable, congratulations—your intuition has picked up on a genuine contradiction. This article explains exactly why this contradiction exists, why the Federal Reserve finds itself in a bind, and how it relates to your and my mortgage, petrol costs and savings.
