There was a time when rising energy prices stoked fear into the heart of central bankers. Those days are long gone, according to HSBC. Its analysts say central bankers shouldn’t be put off by the recent gains in oil prices, as the inflationary push they produce won’t last very long. They added that rising prices “shouldn’t be a game changer for Asian central banks.” Because the global economy is weak, things will quickly cool off if prices rise much beyond current levels.
HSBC summed up its view:
It is hard to see the world economy sustain lofty crude prices for very long. Imagine where growth would have been in the first quarter had oil been stuck around, say, USD100 per barrel over the last nine months. Ironically, the case for rate cuts may only get stronger the higher oil now climbs.
Photo courtesy of GMT via Flickr.