Asia-Pacific inflation was stable in June, but the rebound in energy prices in July is raising upside risks

Overview

This report is Goldman Sachs' monthly monitor of inflation in Asia-Pacific economies, covering Mainland China, South Korea, Taiwan, India, Indonesia, Malaysia, the Philippines, Thailand, Vietnam, Japan, Hong Kong, Singapore, Australia, and New Zealand, among others. The latest inflation data mainly run through June 2026, while some energy price data extend into mid-July. The report focuses on the impact of energy price shocks, CPI/PPI trends, import prices, wage growth, and retail energy prices on the regional inflation outlook.

Core views

The core view is that Asia-Pacific inflation was broadly stable in June, but the rebound in energy prices in July has brought upside inflation risks back into focus. Before the war, CPI inflation in most countries was broadly within or below central bank targets, whereas headline and core CPI are now generally near or above target. Goldman Sachs and market consensus had previously raised inflation forecasts after the Iran war, the closure of the Strait of Hormuz, and declines in Asian energy supply; those expectations have moderated over the past two months, but forecasts could still be revised higher again if disruptions persist. The current shock is clearly milder than in 2021-22, and pass-through to core inflation has so far been limited.

Analysis framework

The report adopts a cross-economy data-tracking approach, combining a regional overview with economy-specific pages to compare CPI, core CPI, CPI momentum, CPI component contributions, PPI, import prices, wage growth, and retail energy prices. At the regional level, it also incorporates oil prices, LNG flows, energy flows through the Strait of Hormuz, refined product prices, and Goldman Sachs' oil price forecasts to assess how energy shocks transmit into the Asia-Pacific inflation path.

Methodology notes

• Macro inflation monitoringCPI/PPI and import price tracking

  Observe sources of inflation pressure jointly through consumer prices, producer prices, and import prices.

  CPI reflects price changes on the consumer side, while PPI and import prices are closer to the cost side and supply shocks. Rising energy prices usually show up first in import prices and producer prices, and then pass through to CPI depending on subsidies, price controls, and demand conditions.

• Energy shock analysisOil price and refined product pass-through framework

  Combine Brent oil prices, refined product prices, strait transport, and retail fuel prices to judge the intensity of energy shocks.

  The report notes that oil prices were soft in June but have recently risen again, and refined product prices are far above pre-war levels; explicit or implicit subsidies in some economies can mitigate the pass-through from retail fuel prices to consumer inflation.

• Regional comparisonComparison with central bank target ranges

  Compare inflation in each economy relative to its central bank target.

  The report compares inflation in each economy with its target or target range, noting that Asia-Pacific inflation is currently near or above target, with China's target treated as an upper bound.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Brent crude oil

  Core variable in the energy price shock

  Strengths

  The report maintains its Q4 $80/bbl forecast as an important anchor for assessing imported inflation in Asia-Pacific.

  Weaknesses

  Geopolitics and transportation bottlenecks create high forecast uncertainty.

  Comparison

  The current oil price shock is weaker than in 2021-22, but the recent rebound has shifted risks back to the upside.

  Risks

  The US-Iran conflict, the Strait of Hormuz, and Red Sea bottlenecks could push oil prices even higher.

• Asia-Pacific CPI inflation

  Macroeconomic monitoring target

  Strengths

  Inflation is broadly stable in most economies, with limited pass-through to core inflation.

  Weaknesses

  Headline and core CPI are already generally near or above target.

  Comparison

  The shock is milder than in 2021-22, but conditions are tighter than before the war, when inflation was within or below target.

  Risks

  Persistent energy supply disruptions could lead to another upward revision in inflation forecasts.

• Asia-Pacific rates and FX

  Assets indirectly affected by inflation and central bank responses

  Strengths

  If wage inflation remains stable and core pass-through is limited, policy pressure can stay manageable.

  Weaknesses

  Higher energy import prices could compress policy easing room and increase FX pressure.

  Comparison

  Economies with higher dependence on energy imports are relatively more vulnerable to external price shocks.

  Risks

  Higher oil prices, rising import prices, and firmer inflation expectations could increase rate volatility.

Key data

• Brent oil price forecast$80/bbl in Q4Goldman Sachs' commodities team maintains this forecast, but sees risks tilted back to the upside.
• Data time rangeMost CPI/PPI data are for June 2026, with some energy price data through mid-July 2026The report tracks inflation at both the regional and economy-specific levels.
• Intensity of the energy price shockWeaker than in 2021-22The report explicitly states that the current inflation shock remains significantly milder than in 2021-22.
• Core inflation pass-throughLimited so farRegional charts indicate that pass-through from the energy shock to core inflation is currently constrained.
• Wage inflationStable or declining in most regionsWage growth is soft in high-income economies, with Japan as the exception.
• Refined product pricesSignificantly above pre-war levelsThe report says refined product prices are far above pre-war levels.

Impact & implications

In terms of investment implications, the rebound in energy prices raises imported inflation and policy uncertainty for Asia-Pacific economies, especially for those with higher dependence on energy imports, weaker subsidy mechanisms, or faster price pass-through. If oil prices stay high or supply disruptions persist, inflation forecasts may be revised upward, room for central bank rate cuts may be constrained, and volatility risks for rates, FX, and consumption-related assets may rise. Conversely, if subsidies suppress retail fuel prices and wage inflation does not accelerate, core inflation pressures may remain contained.

Risks

• Persistent energy supply disruptions causing further increases in oil and refined product prices.
• An escalation of the US-Iran military conflict, or worsening transport bottlenecks in the Strait of Hormuz or the Red Sea.
• Pass-through from higher import prices and PPI to CPI and core CPI proving stronger than currently expected.
• Subsidies or price controls weakening fiscal space, or creating lagged inflation pressure when withdrawn.
• Wage growth re-accelerating, especially in economies with tighter labor markets.

What to watch

• Whether Brent oil prices trade above the Q4 $80/bbl forecast.
• Whether energy flows through the Strait of Hormuz and LNG flows recover or face renewed disruption.
• The subsequent pass-through of import prices, PPI, and retail fuel prices across Asian economies.
• Whether core CPI continues to show limited pass-through or starts to rise with energy prices.
• Policy guidance and rate path changes in economies with inflation near central bank targets.