Oil prices jump as China looks to kickstart its economy while Wall Street eyes Fed pause

• Oil prices climbed Tuesday as China tries to boost growth amid a disappointing post-COVID rebound.
• The People's Bank of China unexpectedly trimmed its short-term lending rate.

Oil prices climbed Tuesday as China's central bank lowered a key rate in a bid to boost economic growth amid a disappointing post-COVID rebound.

Brent crude, the international benchmark, rose 3.59% to $74.42 a barrel. West Texas Intermediate moved 3.95% higher to $69.77 on Tuesday.

The People's Bank of China unexpectedly trimmed its short-term lending rate and deposited 2 billion yuan into the banking system, which suggests policymakers' growing urgency to stoke the economy.

The move, however, may not provide as much growth as desired, experts say, given that households and businesses still face high debt levels.

China's policy loosening comes as fresh inflation data in the US raised hopes on Wall Street that the Federal Reserve will pause its rate hikes.

The consumer price index on Tuesday showed a 4% rise in May compared to a year ago, below forecasts for a 4.1% gain and less than half of the 9.1% peak rate last June, but still above the Fed's 2% target.

Traders expect the Fed to leave borrowing rates as-is on Wednesday, after 10 consecutive increases, before tightening again in July.

But a pause, in Mohamed El-Erian's view, would mark yet another policy error. "Skipping" a rate hike "could potentially be the least desirable" outcome right now, the economist wrote in a Monday op-ed for the Financial Times.

"An additional month of data is unlikely to significantly enhance the Fed's understanding of the effects of a policy tool that acts with variable lags," he wrote. "Recent data favors a hike for a central bank that has repeatedly insisted that it is 'data dependent.'"