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The Effect of Oil Prices on Core Inflation: Recent Evidence from the Advanced Economies, Accessible Data

Figure 1: Average Advanced-Economy Core Inflation
Date Data Predictions, pre-pandemic persistence and pass-through Predictions, stronger persistence Predictions, stronger persistence and pass-through Pre-COVID average
2/15/2016 1.191373887       1.183095
5/15/2016 1.2117848        
8/15/2016 1.137263773        
11/15/2016 1.148934009        
2/15/2017 1.230175444        
5/15/2017 1.272770113        
8/15/2017 1.291387116        
11/15/2017 1.358329467        
2/15/2018 1.424626843        
5/15/2018 1.350115785        
8/15/2018 1.414640846        
11/15/2018 1.373698542        
2/15/2019 1.336571294        
5/15/2019 1.384267456        
8/15/2019 1.340169123        
11/15/2019 1.304298387        
2/15/2020 1.251981627        
5/15/2020 0.814698004        
8/15/2020 0.834281596        
11/15/2020 0.870896327        
2/15/2021 1.094588264 1.131264341 1.06509018 0.977397358  
5/15/2021 1.464726822 1.497144653 1.502156629 1.218978533  
8/15/2021 1.895379641 1.892547864 1.95405543 1.845881498  
11/15/2021 2.480341802 2.421649811 2.484883433 2.363186389  
2/15/2022 3.041888074 2.89877001 2.955022335 3.058555901  
5/15/2022 3.885653384 3.455272907 3.50533626 3.899452963  
8/15/2022 4.289282692 3.826099065 3.892665051 4.176064479  
11/15/2022 4.591316825 4.00142169 4.113137594 4.514292735  
2/15/2023 4.574755675 4.005151474 4.163167048 4.51611883  
5/15/2023 4.577746975 3.803618431 4.016620129 4.393972707  
8/15/2023 4.192843246 3.71735332 3.934838772 4.118109369  
11/15/2023 3.626874548 3.487528229 3.709357417 3.619041491  
2/15/2024 3.170715225 3.104333866 3.334622204 3.130087674  
5/15/2024 2.685868037 2.740696329 2.979386079 2.696153647  
8/15/2024 2.524148488 2.426393926 2.676240563 2.522380877  
11/15/2024 2.518667859 2.212673396 2.479416132 2.468312323  
2/15/2025 2.58326335 2.188948232 2.449383295 2.416574055  
5/15/2025 2.565551525 2.239485991 2.479939163 2.445316148  
8/15/2025 2.505174828 2.24255864 2.474401259 2.388848615  
11/15/2025 2.480328572 2.219186205 2.436796129 2.226094687  
2/15/2026 2.398125494 2.2784814 2.476696765 2.304212993  
5/15/2026 2.220105828 2.388132447 2.555915102 2.234421578  

Note: Advanced-economy core inflation is calculated as the simple average over Canada, the euro area, Japan, the U.K., and the U.S. Pre-COVID average is calculated over 2000:Q1-2019:Q4.

Source: Haver Analytics; Authors’ calculations.

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Figure 2: Effects on Core Prices of a Permanent 10 Percent Increase in Oil Prices
Quarters after price increase Pre-pandemic persistence and pass-through Stronger persistence Stronger persistence and pass-through
0 0.019622384 0.018832927 0.018377463
1 0.025737961 0.026483608 0.010519885
2 0.030137378 0.037560572 0.064386509
3 0.022629345 0.038819406 0.089577534
4 0.032257655 0.056569588 0.185012117
5 0.033937436 0.063368539 0.226887115
6 0.037365625 0.071169139 0.269008847
7 0.039211301 0.076036407 0.296143992
8 0.040928361 0.080144162 0.317886708
9 0.042140655 0.083094503 0.333446418
10 0.043115218 0.085397678 0.345235281
11 0.043850502 0.087118496 0.353909938
12 0.04442243 0.088433943 0.360388545

Note: Cumulative response of the core price level to a permanent 10 percent increase in oil prices, averaged across five advanced economies (Canada, euro area, Japan, U.K., and U.S.). All exogenous variables are held fixed; the response reflects only oil price pass-through and the intrinsic persistence of core inflation.

Source: Authors’ calculations.

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Figure 3: Advanced-Economy Core Inflation Forecasts
Date Pre-pandemic persistence and pass-through Stronger persistence Stronger persistence and pass-through
2/15/2026 2.398125494 2.398125494 2.398125494
5/15/2026 2.220105828 2.220105828 2.220105828
8/15/2026 2.201618142 2.249141462 2.278972872
11/15/2026 2.105570872 2.221008499 2.362459321
2/15/2027 2.031576534 2.22800072 2.500188549
5/15/2027 2.12745297 2.401972771 2.842950821
8/15/2027 2.138833761 2.440954685 2.85184902
11/15/2027 2.185925841 2.496719778 2.794329882
2/15/2028 2.19071722 2.499947309 2.605248749
5/15/2028 2.152236342 2.468722582 2.342611194
8/15/2028 2.129973412 2.46256727 2.267740726
11/15/2028 2.090566635 2.443698585 2.18397522

Note: Advanced-economy core inflation is calculated as the simple average across Canada, the euro area, Japan, the U.K., and the U.S. Forecasts are based on: (i) the Brent futures curve as of early August 2026; (ii) realized GSCPI through 2026:Q2, projected forward with a decay rate of 0.8; and (iii) average core inflation in 2026:Q1–Q2 as initial conditions. Shaded area indicates model forecasts.

Source: Haver Analytics; Bloomberg; Authors’ estimates.

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Figure 4: Effects of a 10 Percent Rise in Oil Prices: Structural Model Simulations

Top left: Core Inflation (4-quarter)

quarters Pre-COVID Higher persistence Higher persistence and passthrough
1 0.009043843 0.009370257 0.028293162
2 0.016597852 0.021695498 0.066295434
3 0.02216991 0.033844641 0.104725205
4 0.026119566 0.044457079 0.139392546
5 0.019760268 0.04372676 0.140532434
6 0.013912305 0.038088859 0.126639316
7 0.009288927 0.03089355 0.107541377
8 0.005697715 0.023783531 0.088203693
9 0.002905598 0.017471344 0.070888633
10 0.000716963 0.012178067 0.056390366
11 -0.001023357 0.007879955 0.044741956
12 -0.002434878 0.00444548 0.035618506
13 -0.003607188 0.001709501 0.028563107
14 -0.004605553 -0.000488673 0.023108607
15 -0.00547607 -0.002287821 0.018838006
16 -0.006250179 -0.003798886 0.015409033
17 -0.006948473 -0.005105248 0.012558433
18 -0.007583811 -0.006266027 0.010095449
19 -0.008163777 -0.00732058 0.007890333
20 -0.00869256 -0.00829315 0.005861364

Top right: Headline Inflation (4-quarter)

quarters Pre-COVID Higher persistence Higher persistence and passthrough
1 0.158813641 0.15913508 0.177785308
2 0.154350253 0.159493336 0.201191961
3 0.149126775 0.160774423 0.226280998
4 0.143404414 0.161540014 0.248888318
5 -0.021374311 0.002158345 0.089799485
6 -0.02294267 0.000495169 0.081086894
7 -0.023709856 -0.003007356 0.067174683
8 -0.023879466 -0.006714619 0.05289303
9 -0.023684055 -0.009942341 0.040321593
10 -0.023298036 -0.012490536 0.030104675
11 -0.022839521 -0.014386807 0.022184995
12 -0.022382395 -0.015749129 0.016206928
13 -0.02196786 -0.016715633 0.011731032
14 -0.021614124 -0.01741161 0.008340979
15 -0.021324124 -0.017936759 0.005689816
16 -0.021091443 -0.018363005 0.003512935
17 -0.02090466 -0.018737382 0.001623797
18 -0.020750411 -0.019086936 -9.82E-05
19 -0.020615416 -0.019423963 -0.001722469
20 -0.020487721 -0.019750783 -0.003281326

Bottom left: Real GDP

quarters Pre-COVID Higher persistence Higher persistence and passthrough
1 -0.005395839 -0.0036247 -0.005395839
2 -0.041606145 -0.039359174 -0.036073301
3 -0.069713952 -0.068298864 -0.086744137
4 -0.090455305 -0.090857772 -0.129490196
5 -0.104666179 -0.107421436 -0.163515697
6 -0.113322117 -0.118515059 -0.188553907
7 -0.117443811 -0.124818217 -0.204965007
8 -0.118016849 -0.127111345 -0.213616715
9 -0.115938342 -0.126206763 -0.215697783
10 -0.111987131 -0.122887887 -0.212536843
11 -0.106812122 -0.117865163 -0.205457014
12 -0.100933443 -0.111749711 -0.195674427
13 -0.094751921 -0.105042227 -0.184237852
14 -0.088563317 -0.098133468 -0.172001886
15 -0.082574648 -0.091312608 -0.159624928
16 -0.076920748 -0.084780235 -0.147583668
17 -0.071679851 -0.078663431 -0.136197159
18 -0.066887482 -0.073031083 -0.125655124
19 -0.062548322 -0.06790819 -0.116046663
20 -0.058645966 -0.063288438 -0.107386888

Bottom right: Monetary Policy Rate

quarters Pre-COVID Higher persistence Higher persistence and passthrough
1 0.005891295 0.006217359 0.014637662
2 0.013670791 0.015402124 0.03926792
3 0.020236498 0.024508258 0.066573554
4 0.02470354 0.032361448 0.093081086
5 0.025153837 0.036612957 0.11105323
6 0.022708864 0.037097392 0.118998959
7 0.018562796 0.034557333 0.118238378
8 0.013655792 0.029990548 0.111084472
9 0.008656734 0.024338446 0.09992628
10 0.004000156 0.018358762 0.086812035
11 -6.49E-05 0.012594531 0.073304462
12 -0.003426833 0.007390088 0.0604779
13 -0.006069903 0.002926777 0.048982622
14 -0.008039909 -0.000736386 0.039134105
15 -0.009418074 -0.00362465 0.031004161
16 -0.010301795 -0.005815424 0.024502221
17 -0.010791314 -0.007413191 0.01944184
18 -0.010981105 -0.008531182 0.01559141
19 -0.010954872 -0.009278978 0.012710211
20 -0.010783174 -0.009754913 0.01057199

Note: All variables are for an average advanced economy.

Source: Haver Analytics; Authors’ calculations.

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Last Update: November 09, 2026