Global Inflation Risks Persist Into 2027

Global inflation is expected to remain elevated well into 2027, according to a Reuters poll of more than 500 economists conducted in October. The latest forecasts reflect growing concerns that price pressures could become entrenched as higher energy costs spread through the broader economy.

Economists raised their 2027 inflation forecasts for 31 of the 50 economies surveyed. Among developed economies, projections increased for 15 of the 21 countries covered, indicating that inflation concerns are extending beyond markets typically associated with persistent price pressures.

Oil prices have remained above $100 a barrel since October 7 and exceeded $117 last week, reaching a six-month high. Crude prices have risen more than 60% since the US-Israeli war with Iran began almost eight months ago.

The concern is that sustained energy costs could gradually affect transportation, production and other business expenses, extending inflationary pressures beyond fuel prices. If these effects persist, central banks may face greater difficulty bringing inflation back toward their targets.

Inflation Expectations Rise Across Major Economies

The upward revision in inflation forecasts has been particularly notable in several major economies. Across the past three quarterly Reuters polls, median inflation forecasts for 2027 increased by 0.7 percentage points for the United Kingdom, 0.5 percentage points for the euro zone, 0.2 percentage points for the United States, 0.4 percentage points for India and 0.5 percentage points for Brazil.

These changes suggest that inflation risks are becoming more widespread. Even economies that have traditionally experienced relatively moderate price pressures are facing a more uncertain outlook as higher energy costs filter through global supply chains.

Seth Carpenter, global chief economist at Morgan Stanley, said resilient economic activity and the AI-led investment cycle were supporting growth despite rising energy prices. He also noted that signs of energy costs passing through into core inflation measures were beginning to emerge.

Economic Growth Remains Resilient

The October survey presents a stronger growth outlook than the Reuters polls conducted in April and July, which pointed toward weak growth combined with high inflation.

Economists now expect global economic growth of 3.0% in 2026 and 3.2% in 2027, up from previous forecasts of 2.9% and 3.1%, respectively. However, the 2027 projection remains below the International Monetary Fund’s forecast of 3.4%.

The United States continues to benefit from substantial investment in artificial intelligence infrastructure, which has become a major driver of domestic economic activity. US growth is forecast to reach 2.3% in 2026 before moderating to 2.1% in 2027.

Resilient growth supports business activity and investment, but it may also make inflation more persistent. When demand remains firm while energy and other input costs increase, central banks may have less room to ease monetary policy.

Central Banks Face Renewed Policy Pressure

Many central banks have raised interest rates only modestly or have left them unchanged. However, if inflation broadens beyond energy and other directly affected categories, additional rate increases could become necessary.

Global bond market volatility has already tightened financial conditions through higher yields. Further increases in borrowing costs could raise financing expenses for households, businesses and governments, potentially weighing on investment and economic activity.

The challenge for policymakers is to contain inflation without unnecessarily weakening growth. The latest forecasts suggest that this balance could become more difficult if energy prices remain elevated and stronger economic activity continues to support demand.

What Investors Should Watch Next

Investors will be monitoring oil prices, upcoming inflation data and central bank communications for evidence that price pressures are spreading into broader measures of inflation. The duration of elevated energy costs will be particularly important in determining whether current pressures remain temporary or become more persistent.

The relationship between AI investment and economic growth will also influence the outlook. Continued technology spending could help sustain activity, while higher interest rates and rising financing costs could eventually constrain investment. The combination of resilient growth and persistent inflation may therefore remain a central consideration for financial markets through 2027.