Deflation no longer threat to Asia, says ANZ, tipping US$54 oil barrel end-2016

SINGAPORE - With oil prices rebounding from its January low of US$27/bbl to above US$40 now, ANZ Bank says the threat of global deflation has waned substantially. It believes the market has become overly bearish on the back of rising rig activities in recent weeks. "Fundamentals continue to favour a price recovery which is forecast to end with US$54 by December 2016,” ANZ says. “This development will see the end of deflation in Asia.

“In fact, the inflation rates of most Asian economies have gone up over the past six months. Producer prices in China and wholesale prices in India have improved by more than 2.5ppts.
“Our scenario analysis suggests that CPI inflation rates of most Asian economies would be invariant even if crude prices drop back to US$30 or surge to US$70, allowing their central banks to stay focussed on addressing growth and other domestic issues. India could prove to be the exception.”  www.live.anz.com (ATI)