China’s Reopening May Fuel Inflation

The Economist: “China’s recovery will have painful side-effects. In much of the world it could show up not in higher growth, but in higher inflation or interest rates. Central banks are already raising rates at a frenetic pace to fight inflation. If China’s reopening increases price pressure to an uncomfortable degree, they will have to keep monetary policy tighter for longer. Countries that import commodities, including much of the West, are at the greatest risk of such disruption.”

“Take the oil market. Rising Chinese demand should more than compensate for faltering consumption in Europe and America, as their economies slow. According to Goldman Sachs, a rapid recovery in China could help push the price of Brent crude oil to $100 a barrel, an increase of a quarter compared with today’s prices (though still below the heights reached after Russia invaded Ukraine). Rising energy costs will prove another hurdle to taming inflation.”

Bloomberg: “An underlying gauge of euro-zone inflation flared to a record last month, indicating persistent price pressures that will likely extend the European Central Bank’s most-aggressive bout of interest-rate hikes in its history.”