Reuters poll shows global inflation persisting well into next year as price pressures broaden

BENGALURU, Oct 27 — High inflation will persist across the global economy well into next year, and economists are increasingly convinced price pressures are becoming entrenched beyond the energy shock from the Middle East conflict, a Reuters poll of more than 500 forecasters shows.

The survey, conducted this month, raised 2027 inflation forecasts for 31 of the 50 economies covered — including 15 of 21 developed economies, a breadth suggesting the problem is spreading to countries that typically run low inflation. Growth forecasts for 2027 were lifted for 23 economies.

Energy sits at the center of the concern. Crude oil has held above $100 a barrel since Oct 7, climbed to a six-month high above $117 last week, and is up more than 60% since the US-Israeli war with Iran began almost eight months ago, the economists noted. A recent global rout in bond markets has tightened financial conditions through higher yields, adding to the squeeze.

Most central banks have raised interest rates only a few times or not at all during this cycle, according to the poll, leaving room for further tightening if inflation pressures broaden. Even forecasters who did not anticipate a quick end to the war are sounding more worried about an inflation resurgence — particularly given the resilience of global growth.

"I am getting much more concerned about inflation again," said Janet Henry, global chief economist at HSBC. "The longer the situation evolves and escalates in the Middle East and the higher the broad basket of price pressures builds, the greater the likelihood that we get not just higher but more persistent inflation."

The deterioration is visible in the survey's trend lines. Cumulative median forecasts for 2027 inflation over the past three quarterly polls have risen 0.7 percentage points in Britain, 0.5 percentage points in the euro zone and 0.2 percentage points in the United States. India's median forecast is up 0.4 points, Brazil's 0.5 points.

Cushioning the blow is technology investment. More than $1 trillion has gone into artificial-intelligence development globally since last year, helping make some economies more resilient at a time when cost-of-living pressures are squeezing households and shaping national politics. The US, which leads in AI capital expenditure — now the main driver of domestic growth — is forecast to expand 2.3% this year and 2.1% in 2027.

"Higher energy prices continue to ripple through the global economy, but economic activity remains resilient, supported by the AI-led investment cycle and firmer-than-expected activity across several regions," said Seth Carpenter, global chief economist at Morgan Stanley. "The inflation picture has become more complex as signs of energy pass-through into core measures are beginning to emerge."

The combination marks a shift from the April and July polls, which sketched a weak-growth, high-inflation scenario; the latest forecasts lean toward price pressures travelling alongside more robust economic performance. Economists upgraded global growth forecasts for this year and next to 3.0% and 3.2%, respectively, from 2.9% and 3.1% in July. The 2027 projection still trails the 3.4% the International Monetary Fund expects.

The political stakes are already evident. Opinion polls show US voters heading into the Nov 3 midterm elections preoccupied with cost-of-living issues, and Brazil's presidential election — which gave incumbent Luiz Inacio Lula da Silva his fourth non-consecutive term — was fought on the same terrain.

For central banks, the poll sketches a delicate balance: growth that keeps beating expectations, inflation that refuses to fade, and the prospect that more rate moves may be needed if price pressures broaden.