Here’s another market factoid for our inflation hawks in the Reserve Bank and Governor Michell Bullock to ponder and ignore as they shelter from the storm of criticism after Tuesday’s rate rise.
After musing very loudly in October about the potential damage unpredictable price rises for oil and petrol could do to inflation and expectations of higher inflation, Ms. Bullock has gone all quiet as global prices have fallen sharply – to two-month lows last week and now on Tuesday, to their lowest level since July.
The prices of Brent, the global marker crude, and US West Texas Intermediate crude fell by more than 4% to their lowest levels for more than three months on Tuesday as fears about weak activity worried investors.
The weakness fears, though, seem to be a bit misplaced. The International Monetary Fund upgraded its 2023 outlook for China’s economic growth to back above 5%, but left unchanged its still solid 4.6% estimate for 2024. Meanwhile, Chinese oil imports jumped to their highest level for several months in October, while copper imports hit a 10-month high, and coal and iron ore imports were steady at near-record highs.
While China’s exports fell 6.6% in October, a bit weaker than forecast, imports rose 3%, surprising analysts who had forecast another monthly fall.
The fall in oil prices more than offset concerns that the Israel-Hamas war could erupt into a broader regional conflict.
West Texas Intermediate fell $US3.45, or 4.3%, settling at $US77.37 a barrel, while Brent fell $US3.57, or 4.2%, settling at $US81.61, both their lowest prices since July.
The fears about weak demand running into 2024 also outweighed the small boost on Monday from confirmation that Saudi Arabia and Russia would maintain the production cuts of a total of 1.3 million tonnes until the end of the year.