RBA Assistant Governor Hunter says risk of inflation expectations drifting higher is elevated, and the Middle East conflict is a clear external shock, adds recent rise in oil prices is particularly challenging to navigate

Says:

• Shock has come against a backdrop of elevated capacity constraints and domestic cost pressures, and their research suggests pass-through will be faster and more extensive.
• Expects firms will pass through higher oil prices relatively quickly and noted their forecasts assume that the Gulf conflict gets resolved soon.
• Sees inflation risk on both the upside and downside.