Navigating Shifting Sands: Inflation, Policy Divergence, and Geopolitical Undercurrents

Persistent Inflationary Pressures

Energy Price Shocks

1. Geopolitical events, particularly in the Middle East, are driving significant increases in oil prices, directly impacting global inflation expectations.
2. This surge in energy costs is leading to upward revisions in inflation forecasts for multiple countries, prompting central banks to reassess their policy stances.

Sticky Core Inflation

1. While some supply-side issues are unwinding, the pass-through of higher import tariffs and energy costs is contributing to persistent core inflation.
2. The delayed impact of these factors suggests that a decline in core inflation may not materialize until the latter half of 2026 in some regions.