Analyst: Rising oil prices may become a more structural driver of inflation

Mars Finance news: In a report, an analyst at the First Abu Dhabi Bank said that the strength in oil prices has already—and will continue (at least in the short term)—to become a more structural driver of inflation pressure. The analyst noted that inflation pressure has led to a sell-off in interest rates despite fading expectations for central bank rate cuts. Previously, the market expected the Federal Reserve to cut rates two to three times this year, but those expectations have been ruled out. LSEG data shows that the money markets currently expect the U.S. policy rate in 2026 to remain broadly unchanged, with only a very slight tightening bias. The market has even priced in a scenario in which the European Central Bank and the Bank of England become more hawkish by the end of this year, with rate hikes of 74 basis points and 56 basis points, respectively—“to a large extent, this is the result of Europe-driven imported energy inflation.”