BNP Paribas: Oil Price Drop to Feed Through to Inflation Only After 3–6 Months

BNP Paribas said recent declines in oil prices are unlikely to provide immediate relief to global inflation, warning that the impact on consumer prices typically takes several months to materialize.

In a recent report, the bank noted that while easing geopolitical tensions between the United States and Iran have strengthened confidence in global economic resilience, they have not led to an upgrade in its overall growth outlook.

BNP Paribas said its baseline scenario had already assumed a relatively stable global growth environment, supported by sustained investment in artificial intelligence and ongoing fiscal stimulus programs in Europe.

The bank added that recent developments in the Middle East, including signs of de-escalation in the U.S.–Iran standoff, arrived earlier than expected and contributed to a sharper decline in oil prices.

However, it stressed that this shift does not materially change its broader macroeconomic projections.

According to the report, lower oil prices are expected to gradually ease inflation expectations among households and help reduce underlying price pressures over time.

However, BNP Paribas cautioned that the transmission of energy price declines into headline inflation is not immediate. Existing inflation dynamics, it said, continue to reflect earlier increases in energy and commodity prices that are still working their way through the economy.

As a result, the bank estimates that the full disinflationary impact of lower oil prices is likely to become visible only after three to six months.

The report emphasized that policymakers are unlikely to shift course quickly, given that inflation pressures remain partly driven by lagging effects from previous price surges.

This suggests that major central banks will continue to monitor incoming data closely before considering any meaningful easing of monetary policy.

BNP Paribas concluded that while lower energy prices improve the medium-term inflation outlook, they are not sufficient on their own to resolve current price pressures, reinforcing the need for continued policy vigilance in the near term.