Inflation control on a tightrope

Inflation control on a tightrope

CPI rebounded 0.47% m/m in Aug-26, ending a 2-month disinflation streak, pushing y/y growth to 4.89%, above HSC’s 4.41% forecast. Transport was the key driver with a 4.09% m/m growth, adding 0.41ppts to the headline. Average CPI reached 4.45% y/y in 8M26, close to the Government’s 4.5% target. Although Brent averaged USD91.4/bbl as of 9 September, below our FY26F assumption of USD95/bbl, spot prices briefly exceeded USD100/bbl in early September. A prolonged period of elevated oil prices would therefore increase upside risks to our 4.7% FY26F CPI forecast. Global central banks are facing a more difficult policy trade-off as higher energy prices revive inflation pressures. The ECB has already raised rates by 25bps inp Sep, while market pricing for a 25bps Fed rate hike has strengthened materially.