Oil Price Impact on US Inflation Expected to Ease in 2027
DBS' Chief Investment Officer for North Asia, Yeang Cheng Ling, believes that the impact of rising oil prices on US consumer price inflation will ease in 2027 as supply and demand conditions normalize.
Oil prices have risen by around 50% from last year, while current US consumer price inflation assumptions are based on oil prices of around $100 per barrel. However, Cheng Ling pointed out that the high base set in 2026 would reduce the impact of any further increase in oil prices on inflation next year.
He added that DBS does not expect oil prices to rise by another 50% from current levels, citing a normalisation in both demand and supply. Saudi Arabia's oil exports stood at around 6 million barrels per day in September, which is broadly in line with the country's average daily exports in 2025.
A softer impact from oil prices could also provide the US Federal Reserve with greater flexibility on monetary policy. However, forecasting the Fed's policy path has become more difficult, making it harder for investors to predict their next move.