The decline in oil prices has clear adverse effects, however, on oil-exporting emerging economies. Some of these countries, which have relied on high oil prices to balance their budgets, could face financial stress (Chart 13). While lower oil prices will undoubtedly depress headline inflation, this is a temporary effect that central banks will look through in setting monetary policy.
Provided that consumers and businesses understand that the drop in oil prices is a one-time change, it should not slow the pace of underlying inflation. 6  R. Alquist and O. Gervais, “The Role of Financial Speculation in Driving the Price of Crude Oil,” Bank of Canada Discussion Paper No. 2011–6, 2011.