Higher Oil Prices Will Push Up Asian Inflation: HSBC Global Researc

KUALA LUMPUR, March 14 (Bernama) -- HSBC Global Research has reiterated the dampening effect of higher oil prices on Western economies as well as pushing up inflation in Asian countries in the long term. Co-head of Asian Economics Research Frederic Neumann said higher oil prices may knock down export growth to Western markets, which are far more sensitive, at least in the current environment, to swings in the price of crude. "In the West, slower growth in response to oil may also reinforce a bias towards easing, which raises the prospect of even more capital rushing towards Asia," he said in a research note Tuesday. Higher oil prices would, in the long term, push up inflation in Asia, not just because of higher energy costs, but also rising food prices, he said. "Food prices tend to rise with a lag in response to oil. And food matters hugely for regional inflation," Neumann said. He said factors contributing to the increasing oil prices include the returning demand from Asian countries, increasing global car sales, and higher oil imports by Japan to generate its electricity after shutting all but two of its 54 nuclear power plants. Neumann said the rise of crude prices needs to progress gradually as a sharp spike would cause havoc with demand in advanced markets, as well as global risk appetite, that even Asian growth would come off its rails. "Another financial road accident in, say, Europe, would have an equally dampening effect on Asia, sparking a further round of capital outflows from the region. "Barring this, with a drift higher in crude, think Asian inflation," he said. -- BERNAMA