Global inflation is expected to remain elevated into 2027 as higher energy prices continue to put pressure on economies, prompting the Organisation for Economic Co-operation and Development to warn that major central banks may need to keep monetary policy tighter for longer.
The OECD raised its 2026 inflation forecast for the Group of 20 economies to 4.1%, up from its June projection of 4.0%. Inflation is then expected to ease to 3.6% in 2027, but the outlook remains vulnerable to further energy-market disruptions.
The organization also raised its inflation projections for every G20 economy except China and Saudi Arabia. The revisions reflect the impact of higher oil and gas prices following disruptions linked to the conflict in the Middle East.
The global economy has so far proved more resilient than initially expected. The OECD now forecasts worldwide growth of 2.9% in 2026, slightly higher than its previous 2.8% projection, before growth reaches 3.0% in 2027. Strong investment in artificial intelligence infrastructure, including data centers and semiconductors, has helped support economic activity and global trade.
However, the OECD warned that the buffers helping economies absorb the energy shock are being depleted. A prolonged disruption to oil and gas supplies could push inflation higher while simultaneously weakening economic growth.
The outlook is creating a difficult environment for central banks. The US Federal Reserve has already raised interest rates, and the OECD expects another increase may be needed as inflation remains above target. Further modest increases could also be required in some other major economies.
The United States is expected to record 2.2% economic growth in 2026 and 2.1% in 2027. US inflation is projected to fall from 3.6% in 2026 to 2.6% in 2027, although tariffs and higher energy costs remain sources of pressure.
Japan’s inflation is projected to rise from 1.8% in 2026 to 2.6% in 2027, while euro-area inflation is expected to remain around 3% this year before easing slightly in 2027.
The OECD also highlighted several risks that could complicate the outlook, including higher government bond yields, another energy shock, extreme weather linked to a potentially strong El Niño and weaker-than-expected returns from the global AI investment boom.
For consumers and businesses, the latest projections suggest that the inflation fight is far from over. Even as global growth holds up better than expected, renewed energy pressures could keep prices elevated and force policymakers to balance inflation control against the risk of slowing economic activity.
