Equity investor says oil prices could affect Fed as they decide on rate cuts

The chief investment officer of Andersen Capital Management said oil prices could affect the Federal Reserve as its policymakers determine their next step on interest rates.

“As Liz Peek had mentioned recently in her op-ed, you know, this will present a speed bump to any of the Fed calculus that’s out there,” CIO Peter Andersen told “Mornings with Maria” on Monday. “And as oil prices rise, certainly, you know, there is going to be an interpretation of that as inflation.”

The Peek-authored opinion piece he referenced was published Thursday by The Hill.

On Monday afternoon, the Brent Crude came in at $90.64.

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Andersen told host Maria Bartiromo the Fed is “not in an easy stroll” when it comes to deciding whether to cut, maintain or raise its benchmark interest rate. 

He said the “specter of higher oil prices” and other economic data like that in the recently released March jobs report could make the decision difficult for the U.S. central bank.

“I think we thought the Fed was going to be very easy-going after these tremendous rate hikes, but it’s not looking very clear for them,” he added. “I expect that they’ll be very frustrated, frankly, for the next several weeks as they try to figure out just what the heck is going on with the economy.”

When the Federal Open Market Committee (FOMC) got together in March, it announced its decision to leave its benchmark interest rate at 5.25% to 5.5%, a level it has been set at since the summer. Federal Reserve policymakers also indicated late last month that plans to cut rates may be pushed out further but remained committed to three this year.

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The FOMC said in a March statement it was “strongly committed to returning inflation to its 2 percent objective” and “will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.”

When it comes to the stock market, Andersen said he has “tried to bypass the whole question” of interest rate cuts “by looking at stocks that might be immune to rate cuts.” 

He pointed to cybersecurity as an example of a “promising” industry, saying, “That isn’t going to go anywhere, and with the more recent announcement of some of these hackings by ransomware, I think that’s a great place to play your major positions in a portfolio right now.” He also mentioned artificial intelligence-related stocks.

GAS PRICES CREEP UP AMID RISING OIL PRICES DUE TO MOUNTING TENSIONS BETWEEN RUSSIA AND UKRAINE

His comments came ahead of the expected Wednesday release of the latest Consumer Price Index (CPI) data by the Bureau of Labor Statistics. That information will be followed Thursday by the Producer Price Index (PPI). 

In February, inflation measured by the CPI went up 0.4% month-over-month and 3.2% year-over-year overall. Gasoline prices posted a 3.8% increase from January but were down 3.9% from a year earlier.

AAA reported Monday the national average for a gallon of regular gas was $3.598.

Suzanne O’Halloran contributed to this report.