Global inflation expectations rise with oil prices, impacting economies worldwide.
Global inflation and short-term inflation expectations were studied using a global model. Three factors were examined: domestic demand and supply shocks, and global oil price inflation. Results show that as inflation rises, so do inflation expectations. Domestic shocks have short-lived effects, but global oil price increases lead to longer-lasting impacts. The link between actual inflation and expectations remains strong post-financial crisis, except for oil price shocks which have smaller effects.