[Edaily Reporter Jang Young-eun ] Expectations are growing that the U.S. Federal Reserve (Fed) will raise interest rates at this week’s Federal Open Market Committee (FOMC) meeting. This comes as international oil prices have once again surpassed $100 per barrel amid a renewed deterioration in the situation in the Middle East. The likelihood of an additional rate hike by the Bank of Korea before the end of the year is also increasing.

In a report published on the 14th, Cho Yong-gu, a research fellow at Shinyoung Securities, stated, “We expect the Fed to raise the benchmark interest rate twice in the near term, including in September,” adding, “In the worst-case scenario, if high oil prices persist even after the midterm elections, a ‘2+1’ series of hikes could push the terminal rate up to 4.50 percent.”

The key factors behind the renewed acceleration of monetary tightening are the protracted war in the Middle East and the resulting sharp rise in international oil prices. Disruptions to crude oil exports occurred after the Bab el-Mandeb Strait—through which Saudi Arabia had been rerouting 5 million barrels of crude oil per day—came under attack by Yemeni Houthi rebels.

The price of West Texas Intermediate (WTI) crude oil has exceeded $100 per barrel, while Brent and Dubai crude have also already surpassed $100. With U.S. President Donald Trump signaling that the war in the Middle East will continue until the midterm elections, it has become unlikely that oil prices will plummet in the short term, which is fueling concerns about a resurgence in inflation.

On the other hand, the Federal Reserve’s justification for keeping interest rates unchanged has weakened amid a series of positive developments, including △strong August employment figures, △a rebound in the Producer Price Index (PPI), and △the Consumer Price Index (CPI) exceeding expectations. According to the CME FedWatch, the probability of a rate hike in September as indicated by the interest rate futures market stands at 87 percent.

In a report released today, the International Financial Center stated, “With market attention focused on the September FOMC meeting, experts assess that the likelihood of an interest rate hike is high, considering the August Producer Price Index and core Consumer Price Index results,” adding, “Past remarks by former Fed Chairman Kevin Warsh, which were somewhat hawkish (favoring monetary tightening), also supported this outlook.”

As the possibility of the Fed shifting to interest rate hikes and external risks such as oil prices and exchange rates have materialized, the Bank of Korea’s monetary policy calculations have become more complex.

Some analysts also suggest that the potential for upward revisions to the potential growth rate and the neutral interest rate—driven by improvements in domestic artificial intelligence (AI) productivity—is also exerting pressure for a benchmark rate hike.

Research Fellow Cho assessed, “The Bank of Korea will likely choose to maintain a high-interest-rate stance after reaching the terminal rate at a faster pace than in the past.” He projected that the Bank of Korea would take a breather at the October Monetary Policy Committee meeting before implementing an additional hike in November, reaching the terminal rate of 3.50% in February or April of next year.