US inflation is heating up and it is being felt well beyond Wall Street. Consumer prices rose 3.7% in September — hotter than expected, driven largely by gas prices. That matters for the Gulf too because most currencies in the region are tied to the US dollar. When the Fed raised rates last month, central banks in the UAE and Saudi Arabia followed. Joining us is Oliver Rust, Head of Data at Truflation, which tracks prices daily. Oliver, welcome and thank you for joining us.
Thanks a lot for having me, Johny. Great to be here.
Truflation tracks prices in real time. How does your data compare with September’s official 3.7% CPI reading?
Truflation measures inflation data on a daily basis. Our number comes in around 3% as of today. The major differences are two factors — first, gas and rising energy prices, which we do capture. Second, the housing market, which we are seeing as a deflationary or cooling factor on inflation. Because of the difference in methodology and weighting between Truflation and CPI, our number is significantly lower. The biggest concern for us is whether those energy prices will filter out into other goods and services.
The Fed prefers PCE over CPI. How do markets react when either comes in hotter than expected?
The Fed prefers PCE because of its broader nature using national accounts data — and that is what it uses for the 2% target. But the concern for us is that both data sets are lagging indicators. The PCE coming out next week will report the September number. Truflation is already reporting the October 22nd number today. We give a much faster headline of what is happening in the marketplace.
Most Gulf currencies are tied to the US dollar. What does stubborn US inflation mean for borrowing costs in the UAE and Saudi Arabia?
The riyal and the dirham are tied to the US dollar. Any higher inflation here will likely result in a tightening of monetary policy that raises the cost of borrowing. So even if inflation is contained in those markets, it still results in higher borrowing costs — whether business borrowing or mortgages. The impact is significant not only in the Middle East but also in parts of Asia.
For oil producers in the Gulf — is higher oil a win or does it create more risk?
It is a double-edged sword. Gulf revenues from oil will accelerate because of higher pricing. But it will also drive up inflation rates. And the question is whether it is not only the energy costs but whether it is getting into core inflation — into goods and services prices — which will then tighten monetary policy further and increase borrowing costs in the Middle East.
What signals should investors watch heading into December?
Two real fundamental signals. First, core inflation — is the price of energy filtering into broader inflationary buckets like apparel, car manufacturing, and recreational activities? Second, the labour market — we have seen a cooling effect on wages for the last six to eight months and a lower hiring and firing environment. Those two factors will determine how much easing or tightening occurs.
What is Truflation seeing for late 2026 and into 2027?
The big question is what happens with the conflicts in the Middle East and Europe and when supply starts to rebalance in the US. If we assume a base scenario where the conflict comes to an end and supplies stabilise by year end, we will start to see inflation cooling again by end of year and coming down significantly in 2027.
Oliver, thank you so much for joining us.
Thanks a lot for having me. Great to be here. Thank you.
