Reserve Bank of Australia warns crude oil inflation risk

• Reserve Bank of Australia official warns rising crude oil prices increase inflation risks.
• Financial markets price in a 76% probability of an interest rate increase to 4.6%.
• Middle East conflict, supply disruptions and tech component demand drive broader global inflationary pressures.

Reserve Bank of Australia Assistant Governor Sarah Hunter warned that crude oil reaching US$102 a barrel increases inflation risks above the target range of 2% to 3%.

The warning follows a drone attack on Saudi Arabia's East-West pipeline that pushed crude prices to five-month highs while national consumer price index inflation remained elevated at 3.5 per cent.

"We do think that risks to inflation right now are skewed to the upside," said Reserve Bank of Australia Assistant Governor Sarah Hunter.

Regional areas face additional pressure with local diesel prices reaching $2.70 a litre, alongside broader cost increases in consumer electronics linked to high demand for microchips.

Following the announcement the Reserve Bank of Australia cash rate target was unchanged at 4.35%.

The central bank monitors global supply shocks alongside domestic wage growth pressures across regional labour markets.

Major commercial banks remain divided on the precise timing of potential policy tightening ahead of upcoming quarterly economic releases.