\n<\/p>\n
A woman shops for prepared food at Eataly March 19, 2026 in the Manhattan borough of New York City. <\/p>\n
Robert Nickelsberg | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n
The Iran war and its impact on the global energy market will keep headline U.S. inflation this year well above the Federal Reserve\u2019s projections, possibly necessitating policy action, according to a key global policy group.<\/p>\n
In its periodic update<\/a> of economic conditions, the Organization for Economic Cooperation and Development forecast all-items inflation in the U.S. to be at 4.2% for 2026. <\/p>\n The forecast is a sharp step up from the prior projection of 2.8%. Moreover, it is much higher than the 2.7% Fed officials estimated<\/a> when they updated their own forecasts last week.<\/p>\n The revision is due to two primary factors: the war in the Middle East<\/a>, and the ongoing impact from U.S. tariffs that, while lower than prior levels, continue to impact prices around the world.<\/p>\n \u201cThe breadth and duration of the conflict are very uncertain, but a prolonged period of higher energy prices will add markedly to business costs and raise consumer price inflation, with adverse consequences for growth,\u201d the OECD.<\/p>\n However, the agency said U.S. inflation is likely to recede sharply in 2027, back to 1.6%, which is actually well below the Fed estimate of 2.2% and less than the central bank\u2019s 2% target. Core inflation, which excludes energy as well as food prices, is estimated at 2.8% this year then 2.4% in 2027.<\/p>\n In its baseline forecast, the OECD said it sees the Fed keeping its policy rate flat through 2027 \u201creflecting rising headline inflation in the near-term, core inflation projected to remain above target through 2027, and solid projected GDP growth.\u201d<\/p>\n The organization, though, cautioned that the Fed and its global counterparts \u201cneed to remain vigilant\u201d against inflation threats.<\/p>\n \u201cThe current supply-induced rise in global energy prices can be looked through provided inflation expectations remain well-anchored, but policy adjustment may be needed if there are signs of broader price pressures or weaker labour market conditions,\u201d the report stated.<\/p>\n The agency sees gross domestic product<\/a> in the U.S. accelerating at a 2% pace this year before easing to 1.7% in 2027. GDP slowed sharply to a 0.7% rate in the fourth quarter of 2025.<\/p>\n The OECD provides its outlook twice a year, with periodic updates.<\/p>\n<\/div>\n
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