Conflict in the middle east could impact inflation, Australia’s central bank head has warned in her first public appearance in Sydney.
Reserve Bank of Australia governor Michele Bullock highlighted oil prices rose in the immediate aftermath of the “shock” of the Israel and Hamas conflict.
Higher oil prices can drive up petrol prices, which impacts inflation. The oil price has risen from US$82.790 per barrel at market close on Oct. 6 to US$88.0214 at the time of writing.
“The initial response to that shock was oil prices rose again. One of the things you would have noticed—I’m sure you’ve noticed, I’ve noticed—is the price of petrol even prior to that had been going up, and so that’s likely to keep oil prices elevated as people are a little bit unsure about how it’s going to impact supply of oil,” Ms. Bullock said.
“At the same time, there might be a concern that all of these sort of defence issues, these sort of war issues, might impact lower growth in places like Europe.
Inflation Impact
More than 1,400 Israelis have been killed and at least 155 people kidnapped, including babies, since Hamas terrorists launched an attack on Israel on Oct. 7.“I think at the moment we are a little bit more worried about the potential inflation implications of this. Typically when we think about shocks to supply that increase prices, you think well, that’s probably ok, it will wash out,” she said.
“But the problem is that we’ve just got shock after shock after shock. And the more that keeps inflation elevated, even if it’s from supply shocks, the more people adjust their thinking. And the more people adjust their inflation expectations, the more entrenched inflation is likely to become. So that’s the challenge.”
Ms. Bullock noted inflation expectations in Australia are elevated at the moment.
Hospital Blast Update
Meanwhile, the Australian Government warned citizens stuck in the Middle East to get out as soon as possible on Tuesday.“We are urging people, if you are in Israel at the moment and you want to leave, leave immediately.”
On Wednesday, at least 500 people were killed when a hospital was struck in Gaza City. Israel denied any involvement in the attack, despite many media outlets reporting they were involved.