IMF raises 2027 global inflation forecast on Iran war

The International Monetary Fund expects global headline inflation to rise to 4.7% in 2026, up from 4.1% in 2025, and then ease to 4.1% in 2027. The fund attributes the increase mainly to higher energy and food prices tied to the war in the Middle East. The projections come from the October World Economic Outlook, released during the IMF and World Bank annual meetings in Bangkok.finance.yahoo+3

The 2026 figure is the same as in the fund's July update, which had already lifted it 0.3 percentage point from April. The 2027 projection, however, is higher than the 3.9% the IMF forecast in July. Measured against April, the IMF describes the change as a cumulative upward revision of 0.7 percentage point. "Growth is being reallocated across countries according to their exposure to the war-induced supply shock and AI-related demand strength," the report said.3news+3

Oil, food and AI

The IMF assumes oil will average \$95.74 a barrel this year, up from \$67.74 in 2025, El País reported. The fund also pointed to the investment boom in artificial intelligence, which is raising demand for capital goods, construction, energy and skilled labor. It called this "a large, front-loaded demand shock exposing capacity constraints in several sectors at once". Its baseline assumes the Strait of Hormuz reopens in March 2027, with conditions broadly back to prewar levels by that October.english.elpais+1

Core inflation, which excludes food and energy, is expected to stay high. The IMF does not expect it to return to 2% in the United States or Europe until mid-2028. It forecasts US headline inflation at 3.6% this year, 0.2 point above its April forecast, falling to 2.8% in 2027. Its models put the chance that US inflation tops 4% next year at about 30%. The fund kept its forecast for global growth this year at 3.1% and expects 3.4% in 2027.finance.yahoo+2

UK and Australia

The fund now expects UK consumer prices to rise 3.3% in 2026, up from 3.2%, and 2.8% in 2027, up from 2.4%, ITV News reported. Chancellor John Healey said "conflict in the Middle East and Europe is hitting people in the UK and around the world".itv

For Australia, the IMF projects inflation of 3.9% this year and 3.1% in 2027, above the Reserve Bank of Australia's 2–3% target range, according to Australian Associated Press. Among developed economies, only Greece, Bulgaria, Lithuania, Croatia, Iceland and Andorra are forecast to have higher inflation in 2026. The Reserve Bank raised its cash rate to 4.6% in September. ANZ's Adam Boyton said another increase in November was more likely than not.canberratimes

The IMF said risks are tilted to the downside. A long stalemate or further escalation in the Middle East could "keep energy and food prices elevated and volatile," it warned, and a reassessment of AI's prospects could set off corrections in equity markets.3news