US: one inflation shock follows another

The analysis of inflation risks in the US now centres on the oil price shock and its potential spillover into non-energy prices. But it is important not to overlook another factor, namely sharply higher tariffs. In 2025, these are estimated to have added 0.8 percentage points to core inflation. This impact is expected to fade in 2026. First, the effective tariff rate has been falling since October. Second, the tariff shock will gradually ‘drop out’ of annual inflation measures. In short, over the coming months, inflation will be subject to opposing forces: upward pressure from oil and downward pressure from tariffs. This should underpin the Fed’s wait-and-see stance.