U.S. Treasury secretary Janet Yellen has criticized the supply cut decision made by the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, calling it “unhelpful and unwise” for the global economy.
What Happened: Yellen, in an interview with the Financial Times, said OPEC+'s move to reduce its output by 2 million barrels per day was especially harmful to emerging markets already struggling with high energy prices.
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“It’s uncertain what impact it will end up having, but certainly, it’s something that, to me, did not seem appropriate, under the circumstances we face,” Yellen told the Financial Times. “We’re very worried about developing countries and the problems they face."
Why It Matters: Yellen's comments come just ahead of annual meetings at the International Monetary Fund and the World Bank, where talks will largely center around high inflation and commodity prices, the Ukraine war and the impact of central bank action.
“I think we’re going to exchange views on whether our countries are addressing these problems, and try to consider whether our collective reaction adds up to something that is sensible,” Yellen told the FT.
On Dollar Strength: Yellen said the dollar's strength was mainly driven by differences in macro fundamentals across nations. “In the case of the U.S., it’s safe haven flows responding to geopolitical tensions and different paces of monetary tightening,” she said.
“We continue to think that markets are functioning pretty well and are generally appropriate given the underlying differences across countries and policies and economic situations," Yellen added.
Price Action: Oil prices have been rising since the OPEC+ announcement. The United States Brent Oil Fund BNO and the Vanguard Energy Index Fund ETF VDE have gained over 9% each in five days.
Photo by World Bank Collection on Flickr
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