A successful deal by the members of the OPEC countries, which could see production cut by the majority of the members totaling more than a million barrels per day, unlikely to bear well for the central bankers in advanced economies. After Donald Trump won the US presidency, central bankers all around the world faced the threat of a looming inflation, and what might happen if it truly materializes. Inflation expectations in the advanced economies are at multi-year highs and bond prices are at multiyear lows.

The lower oil price has been one of the key factors depressing global inflation and if it takes a reverse course, it might soon become a headache for the central bankers, who might have to abruptly change the course of their policies. While US Federal Reserve is better placed to tackle inflation in terms of policy, central banks like the European Central Bank (ECB) and the Bank of Japan (BoJ) are continuing their easing.

Over a very successful deal, the oil price could rise to as much as $65 per barrel from current $48 per barrel. Such a move would lead to at least 1 percent rise in inflation and higher in the case of inflation expectations. We suspect that the selloffs in the bond market would gather pace over a deal.