ECONOMY

Commodity prices are soaring and inflation is rising. Should interest rates start increasing too?

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There’s more inflation coming.

The Kremlin’s invasion of Ukraine, and sanctions imposed on the Russian Federation, have sent oil and energy prices soaring.

The catastrophic floods on Australia’s east coast have caused severe food shortages.

Supermarkets will be lifting prices in response.

But will these rising prices force the Reserve Bank to lift interest rates earlier than planned, to keep inflation in control?

There are two schools of thought.

Global events dominate

The response from western governments to Russia’s invasion of Ukraine is evolving rapidly.

At the start of last week, the European Union floated plans to cut its Russian gas imports by two thirds by the end of the year.

A few days later, it unveiled its fourth package of measures to further isolate Russia and drain the resources it uses to finance its war.

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