This sounds awfully familiar. Oil prices have risen sharply from a March trough, while the U.S. dollar has fallen 10 percent against a basket of currencies. A bad 2008 flashback? Not quite.
Riccardo Barbieri, head of international economics at Banc of America Securities-Merrill Lynch, says oil merits close watching to make sure it does not rise too far, too fast. For now, it does not pose an imminent threat to U.S. or global economic recovery.
”Our economists around the world feel that as long as oil prices did not rise significantly above $80 per barrel, that would not prevent an economic recovery in the second half of the year,” he wrote in a note to clients. “A further rise in oil prices would act as a tax on importing nations, and we would worry in particular about the U.S. consumer.”
A jump in oil prices would also be a headache for central bankers in the rich world because it would bring an unwelcome dose of inflation when the economy is too weak to handle an interest rate rise. If emerging markets stage a strong recovery, driving up oil demand and prices, the U.S. Federal Reserve and other central banks “may have to accommodate a rise in headline inflation, lest the economy fall into a dangerous double dip,” Barbieri said.