FX.co ★ Analysts warn high global inflation may persist through 2027

High inflation in most leading world economies is likely to persist through 2027 amid sustained energy price increases and prolonged geopolitical conflicts, according to the results of an October survey of more than 500 senior economists conducted by Reuters. Analysts raised their forecasts for consumer price growth next year for 31 of the 50 countries covered by the survey, including 15 of 21 advanced economies. At the same time, the growth forecasts were revised up for 23 countries, indicating the unusual combination of persistent price pressures alongside stronger business activity.

The current picture contrasts with spring and summer assessments that assumed a classic stagflation scenario. Large‑scale investments in artificial intelligence technologies and robust consumer activity have helped sustain output, but the flip side of this resilience is entrenched inflation. The principal driver of the pressure remains oil. Since the escalation of the Iran conflict, crude has risen by more than 60%, trading consistently above $100 a barrel and peaking at $117. Economists at HSBC and Morgan Stanley note that the energy shock is beginning to feed through into core inflation measures that strip out the direct effects of volatile fuel and food prices.

Across the last three Reuters survey rounds, median inflation forecasts for 2027 have risen markedly: the United Kingdom’s estimate increased by 0.7 percentage points, the euro area’s by 0.5 percentage points, the United States’ by 0.2 percentage points, Brazil’s by 0.5 percentage points, and India’s by 0.4 percentage points. If second‑round price effects continue to spread, central banks will need to keep borrowing costs at restrictive levels longer than markets currently expect. The situation is further compounded by a global sovereign bond sell‑off, where rising yields have already driven up borrowing costs sharply for corporations and households.