Oil Price Impact on US Inflation Expected to Ease in 2027
The impact of rising oil prices on US inflation is expected to ease in 2027 as supply and demand conditions normalize, according to DBS Chief Investment Officer for North Asia Yeang Cheng Ling. Speaking at a media briefing, Cheng Ling stated that current US consumer price inflation assumptions are based on oil prices of around USD 100 per barrel, which is already a high base set in 2026.
Oil prices have risen by approximately 50 percent from last year, but Cheng Ling does not expect them to rise by another 50 percent from current levels. He cited normalization in both demand and supply as the reason for this prediction, pointing out that Saudi Arabia's oil exports are back at average daily levels.
A softer impact from oil prices could provide the US Federal Reserve with greater flexibility on monetary policy, according to Cheng Ling. He noted that markets have priced in one more rate hike in 2026, but cautioned that predicting the Fed's policy path has become more difficult due to uncertainty.