EM Edge Data Watch: I‘ve learned some lessons along the way

Research evidence excerpt

EM Edge Data Watch: I‘ve learned some lessons along the way

evels, economic structures and policy

frameworks.

costs when determining how much of the price increase to pass through to consumers.

While this has been the dominant driver, starting points, cyclical positions and the

performance of other components have also had a bearing on the short-term evolution

of prices. May’s inflation data showed relatively sturdy monthly prints in Asia and

Africa, driven largely by upward fuel price adjustments. These are the two regions

where inflation momentum has been strongest through May (Figure 1), though in both

momentum has likely plateaued. Inflation momentum has risen from low levels in

Latam as well, to reach its highest levels since mid-2022. Fuel prices are regulated in

much of Latam, yet outside of DomRep and Uruguay, they have seen increases in line

with oil. Softness in other parts of the basket, mainly food prices, have also masked

the effect of higher fuel prices on headline inflation. Europe Edge is well-behaved

with flat or declining momentum in each country.

For now, we do not have reason to make significant adjustments to our inflation and

monetary policy calls, as the US-Iran deal is recent and our forecast for oil is

unchanged. While the oil price forecast of our Commodities team has been based on

the assumption that the Strait of Hormuz would reopen in June, the team still expects Contents

$95/bbl in 2H compared to less than $80/bbl currently in the market. The main

EM Edge Data Watch 1

concern for us remains around the second-round effects into core prices from already Economic outlook summary 4

realized increases in fuel and fertilizer prices. Because the upward transmission of Quarterly outlook summary 5