Federal Reserve Governor Christopher Waller said on Bloomberg TV on Friday that petrol prices may rise, but this is unlikely to lead to lasting inflation. He said it would become an issue for the Fed if energy prices fall back within a few weeks or a couple of months. Waller said a longer period of higher energy prices could spread more widely through the economy. He referred to the 1970s, when energy shocks came in waves and prices did not drop back down.

Labor Market Data In Focus

He said data due that day would show whether the labour market is turning a corner. He added that January job gains were concentrated, and he expects the January jobs figure will be revised down. Waller said that a hot PCE reading and a solid jobs report would point to the Fed waiting. After his remarks, the US Dollar Index rose 0.25% on the day to 99.30. The report also noted that Eren Sengezer focuses on analysing how macroeconomic data, central bank policy, and political events affect financial assets over the short and long term. With the Federal Reserve signaling it will wait for more data, derivative traders should anticipate increased volatility. The latest Core PCE inflation reading for January 2026 came in hotter than expected at 0.4% month-over-month, pushing the annual rate back up to 3.1%. This, combined with today’s solid February jobs report showing a gain of 225,000 payrolls, supports the case for holding interest rates steady for now.

Energy Prices And Fed Policy

The recent spike in energy prices is the main wild card for the coming weeks. We have seen WTI crude oil jump over 10% in the last month to above $95 a barrel amid renewed geopolitical tensions, a move that is already filtering through to the gas pump. Traders should watch options on energy ETFs, as sustained high prices could force the Fed’s hand and change the inflation outlook from a temporary blip to a persistent problem. This uncertainty is fueling a stronger US Dollar, with the DXY index now trading firmly above 99. A hawkish Fed makes the dollar more attractive, putting pressure on other currencies and commodities priced in dollars. This suggests caution for those positioned for a weaker dollar and presents opportunities in currency futures for those betting on continued strength. Looking back, we saw significant progress on inflation throughout 2025, which led many to price in multiple rate cuts for 2026. However, the current situation feels similar to the stubborn inflation we battled back in 2022 and 2023, reminding us that the final leg of this fight can be the most difficult. This shift in expectations means options pricing on interest rate futures will likely show a lower probability of near-term rate cuts than just a few weeks ago. We also need to look closer at the labor market details, as today’s headline number may not tell the whole story. The January 2026 job gains were indeed revised down significantly, from 180,000 to 145,000, confirming that earlier strength was concentrated in just a few sectors. This underlying weakness, contrasted with a solid February report, creates conflicting signals that could lead to choppy trading in equity index futures as the market debates the true health of the economy. Create your live VT Markets account and start trading now.

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