Higher oil prices won’t stop inflation falling next year

The recent upward revision to our oil price forecast does little to alter our view that inflation will fall in 2022. Even if oil prices don’t fall as we expect them to and they stay at their current level, energy inflation would drop back next year, dragging on headline rates. At the same time, though, if oil prices stayed high, this would be yet another factor delaying the decline in inflation, which would make some DM central banks uncomfortable. Moreover, higher oil prices would imply a meaningful hit to consumer spending.