Australia's near-term underlying inflation has been revised higher due to the oil price shock, adding roughly 0.4 percentage points to underlying inflation by the March quarter 2027, Sarah Hunter, assistant governor at the Reserve Bank of Australia, said on Tuesday during a speech at the Bloomberg Forum for Investment Managers in Sydney, New South Wales.
Inflation was already high before the conflict due to domestic capacity pressures and labor constraints, and the conflict has further disrupted global oil and gas markets, adding a major external shock to the economy.
Domestic petrol prices peaked at a 36% increase, while diesel prices rose even higher and remain elevated.
Driven by direct fuel costs, headline inflation is now forecast to peak at 4.8% in the June quarter, a significant upward revision from previous February forecasts.
With a global oil shock on top of pre-existing domestic capacity constraints, the Monetary Policy Board raised the cash rate to 4.35% in its most recent meeting.
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