Diesel Price Surge Sets Stage for Higher Interest Rates in Asia

High diesel prices in the US have driven inflation across the economy, and Asia is likely to feel the effects in the form of higher interest rates. Diesel prices have risen by over 75% in a year, reaching more than $6.50 per gallon.

The Federal Reserve has raised interest rates to between 3.75% and 4%, and most policymakers expect another increase before the end of 2026. The Fed's preferred inflation measure, PCE, came in softer than expected at 3.4% for the year to August, but some experts are wary of this reading due to changes in how certain parts of the index are calculated.

Asia buys most of its oil and fuel from abroad and pays for nearly all of it in dollars. A stronger dollar makes imports dearer in local terms, and a trucking company in India or a fishing operator in the Philippines ends up paying more for fuel largely because of decisions made at the Fed.