Rising fuel prices could force interest rate rise
Shane Oliver, chief economist at AMP, said fuel prices could rise another 10 cents as the rebound in oil prices had not yet fully flowed through, in a note on Friday.
Oil prices would rise further if the conflict in the Middle East continued and global stockpiles ran short, Oliver said.
double quotation markThe longer the strait remains closed and the war escalates, the greater the risk that oil prices will have to rise to around $US150/barrel to bring demand down to match the hit to supply.
Prices are set to rise a further 16 cents when the federal government’s partial fuel relief expires on 2 August. Oliver predicted the government would extend the excise cut.
Rising prices would add to inflation, increasing the chance of an interest rate hike from the Reserve Bank. Markets on Friday were betting on a 65% chance of a hike by December, up from about 50% a week earlier.
