Lower oil prices may be the Fed's next problem: Chart of the Day

Oil prices are finally heading lower — but that may mean a new problem for investors and the Federal Reserve.

Cheaper crude can cool headline inflation and take pressure off consumers. It can also put more money back into an economy that has already been running hotter than the Fed wants.

Read more: How jobs, inflation, and the Fed are all related

That is the shift Apollo chief economist Torsten Sløk is flagging. (Disclosure: Yahoo is a portfolio company of funds managed by affiliates of Apollo Global Management.)

"The narrative in markets is changing from 'lower oil prices mean lower inflation' to 'lower oil prices mean more demand in an already overheating economy, which means higher inflation,'" Slok wrote in a recent note.

The chart shows the breakdown between the two markets.

Brent crude (BZ=F) and the 2-year US Treasury yield had been moving together for months. Oil rose, short-term yields rose. Oil dipped, short-term yields dipped.

Since the April CPI report, crude has fallen back toward levels seen just before the latest Iran-driven spike, with both Brent and WTI crude oil (CL=F) sliding below $70. But the 2-year yield has not followed oil lower.

That is not how the

Fuente original: Yahoo Finance (https://finance.yahoo.com/markets/article/lower-oil-prices-may-be-the-feds-next-problem-chart-of-the-day-100000266.html)