|
By Brent crude futures, which soared 50% in 2021, are up a further 14% already in 2022 at seven-year highs of JPMorgan (JPM) predicts oil could reach It is possible the net impact of a Rate hikes in countries including But policymakers had reckoned on base effects kicking in as the 2021 oil surge abated, tempering year-on-year inflation. Many also argue the psychological impact of Wednesday's data showing British consumer inflation at 30-year highs https://www.reuters.com/world/uk/uk-inflation-rises-highest-since-march-1992-2022-01-19 underscores how the energy effect is cascading into food and hospitality prices. "It could be the cherry on the inflation cake if we don't get a moderation in energy prices," said Frederik Ducrozet, a strategist at Pictet Wealth Management. "This time it's a bit different because we're already at a point where the risks are tilted up and central banks are worried about a wage-price spiral since energy prices contribute to second-round effects." Citi's inflation surprise indexes have hit record or multi-year peaks in OIL MATTERS If oil does hit Crucially, it could also induce businesses to pass costs to consumers, or workers to demand higher wages. These so-called second-round effects can cause a broader inflationary spiral that pressures central banks to act. The effects differ from country to country but in the euro area, a 10% rise in oil adds roughly 0.5% to inflation, though direct effects tend to fade quickly. For The core personal consumption expenditures index, the Fed's preferred inflation measure, would rise by 0.4 pp and 0.3 pp in 2021 and 2022, respectively. That would see one-year household inflation expectations rise 1.2 pp but add just 0.2 pp to five-year expectations, the study said. For some, the second round effects are here already, with the U.S. economy near maximum employment and average hourly wages jumping a solid 0.6% in December. Wage pressures are yet to surface in the euro zone. But given surging energy bills, Societe Generale senior inflation strategist Anticipating calls for tighter policy within the ECB, money markets are betting that rates will rise later this year. The ECB's What happens to oil prices when strong winter demand eases is now key. Coming months should also show if other inflationary elements such as power prices and supply bottlenecks abate. Finally, if costly oil starts hurting consumption and slows economic growth, energy demand tends to self-correct. "If we see that inflation is consolidating, on levels that are higher than current official forecasts, then all central banks might be forced to embrace more conservative approaches, including the ECB," said Antonio Cavarero, head of investments at Generali Insurance Asset Management. "But this is still to be seen." (Reporting by
Copyright © Reuters 2008.
All rights reserved. Republication or redistribution of Reuters content,
including by caching, framing or similar means, is expressly prohibited without
the prior written consent of Reuters. Reuters and the Reuters sphere logo are
registered trademarks and trademarks of the Reuters group of companies
around the world.
Search NewsFilter ResultsPublication DateTopic
Provider |
News, commentary and research reports are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.