Oil Inflationary Concern, Other Factors Mixed

Global factors are mixed in terms of the outlook for inflation. While oil prices are likely to add to headline pressures, supply-chains should continue to weigh on prices. Other commodities are mixed. Oil prices will be watched closely though, especially if higher fuel and transport prices feed into other prices, as they are up around 20% this year and have the potential to rise a lot further if the situation in the Middle East and Ukraine/Russia deteriorates. Most OECD countries are yet to return inflation to target.

• Brent crude is currently trading just above $90/bbl and has averaged $90.15 in April to date. The benchmark is now up over 17% this year rising each month. During 2022 it helped to put downward pressure on inflation but look sets to add to price pressures in 2024, but the key for central banks will be whether there are second round effects on core prices.
• Food prices have also helped reduce inflation recently. In March the FAO measure rose for the first time since July but the annual rate remains in deflation. Rice prices fell in March and are down so far in April too.
• Other commodities are mixed with LME metal prices up in March and April and 3-momentum almost 20%, but iron ore and wool have fallen over the last three months.