Gauging the early inflation impact of the energy shock

The CPI figures for March show that, so far, the energy price shock has had a relatively limited impact on EM inflation. In part, that’s because of energy subsidies (particularly in Asia) and the impact will either be delayed or show up in shortages that affect activity. But it also reflects weakness in broader price pressures. While inflation is likely to rise further, as things stand, these data suggest that most EM central banks have room to look through the shock by keeping interest rates on hold (rather than hiking).