US Daily What the Rebound in Oil Prices Means for Upcoming Inflation Prints

Economics Research 24 July 2026 | 4:38PM EDT

US Daily: What the Rebound in Oil Prices Means for Upcoming Inflation Prints

n Oil prices have rebounded by 35% since their early-month trough to $97/barrel, Ronnie Walker | challenging what had previously looked like a quite favorable near-term inflation Goldman Sachs & Co. LLC outlook. n We continue to expect benign monthly core CPI increases in July (0.20%) and August (also 0.20%), although our forecasts have edged higher over the last few weeks. On the unfavorable side, our nowcast for July airfares has increased by almost 3pp to +2% on the back of the rebound in jet fuel prices. On the favorable side, we continue to expect tepid shelter inflation and limited further tariff-related price increases, and hotel prices are likely to decline modestly further after being boosted by World Cup-related demand. n The rebound in oil prices will have a much more pronounced impact on headline inflation via consumer energy prices. Under the assumption that oil prices will average $93/barrel in August, in line with our oil strategists’ forecast, we are now tracking July monthly headline CPI at 0.12% and August at 0.49%, compared to 0.06% and 0.14% a month ago. n Our CPI forecasts are consistent with 0.21% and 0.23% monthly increases in core PCE prices in July and August, which would leave core PCE tracking just ahead of the September FOMC meeting at 3.05% on a year-over-year basis after accounting for upcoming methodological changes and 2.4% on a three-month annualized basis. The risks to our inflation forecasts are tilted to the upside if disruptions to oil markets intensify further.

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What the Rebound in Oil Prices Means for Upcoming Inflation Prints

Oil prices have rebounded by 35% since their early-month trough to $97/barrel, challenging what had previously looked like a quite favorable near-term inflation outlook that was punctuated by last week’s soft CPI reading.

The 0.02% decline in June core CPI was flattered by large declines in volatile categories: auto insurance prices declined by 2% month-over-month—weighing on the core by 7bp—and wireless phone services prices declined 3% month-over-month—reversing a large increase in May and weighing on the core by 5bp. However, the slowdown was fairly broad-based—we estimate that the Dallas Fed’s trimmed mean PCE increased only 0.14% month-over-month in June—and validated two likely sources of ongoing disinflation: the continued slowdown in shelter inflation and shrinking contributions from tariff-related price increases.

Exhibit 1: We Tentatively Expect 0.20% Increases in Core CPI in July and August

Percentage points Percentage points Contributions to Monthly Core CPI Inflation 0.5 0.5 Rent and OER Auto Insurance 0.4 Used Cars 0.4 Airfares + Hotels Other 0.3 Total 0.3

-0.2 -0.2 Jan Feb Mar Apr May Jun Jul Aug

Source: Department of Labor, Goldman Sachs Global Investment Research

We expect benign monthly core CPI increases again in July (0.20%) and August (also 0.20%), although our forecasts have edged higher over the last few weeks. On the favorable side, we continue to expect tepid shelter inflation and limited further tariff-related price increases. Additionally, hotel prices are likely to decline modestly further: we estimate that World Cup-related demand boosted CPI hotels by 4% at the peak, about three-fourths of which reversed in the June release and the remainder of which we expect to reverse in the coming prints.