Central banks around the world are preparing for possible interest rate increases as soaring oil prices and renewed inflationary pressures threaten to derail global economic stability.

The shift comes as the International Monetary Fund warned that the global decline in inflation has stalled, with headline inflation expected to rise to 4.7 per cent in 2026. The Fund attributed the trend largely to higher energy and fertiliser prices, driven by the prolonged conflict in the Middle East, which has disrupted global oil supplies and key shipping routes.

Crude oil prices have risen sharply over the past year, while energy costs remain significantly above pre-conflict levels despite the release of strategic oil reserves. As these reserves decline, central banks are increasingly concerned that sustained high energy prices could trigger broader inflation across their economies.

The IMF said financial markets are already anticipating higher policy rates, with several central banks in advanced and emerging economies beginning to tighten monetary policy in response to mounting price pressures.

According to the Fund, the impact of rising oil prices is uneven. Energy-exporting countries are benefiting from stronger export earnings, while oil-importing nations face higher import bills, weaker currencies and slower economic growth.

It advised policymakers in countries experiencing both strong domestic demand and rising inflation to maintain tighter monetary conditions or raise interest rates further to prevent inflation expectations from becoming entrenched.

The IMF also stressed the importance of central bank independence as governments contend with rising public debt and slowing economic growth, which is projected to expand by about 3.0 per cent globally this year.