JP Morgan AM: Rising oil prices pose a risk to disinflationary trends
Oil prices rose above $90 per barrel last week after Saudi Arabia and Russia announced that they will be extending production cuts until the end of the year.
Lower energy prices relative to a year ago have been a key factor behind the disinflationary trend witnessed in 2023. This dynamic has been most clear in the US: having added three percentage points to headline inflation rates in June 2022, the energy component is now acting as a one percentage point drag.
While our base case expects inflationary pressures across many developed markets to cool further in the coming months, tightening oil markets pose a key risk to this view. For investors looking to diversify against inflationary scenarios, the ability of many real assets to cope with higher cost pressures is likely to be appealing.
