Consequently, inflation pressures have remained strong in many parts of the domestic economy, including housing and construction. •  The recent sharp rise in world oil prices is putting upward pressure on inflation as higher petrol prices ‘at the pump' and the effects of higher fuel prices risk becoming entrenched in inflation expectations.
At the same time, we are expecting these increases to exert a dampening effect on household and business demand. Estimating the balance of these effects is difficult. 6/7  •  The likelihood of a more expansionary fiscal policy over the coming period has the potential to add inflation pressure in what remains a rather stretched economy.