IMF lifts 2026 global inflation forecast to 4.7%, growth cut to 3.0%

The International Monetary Fund lifted its 2026 global headline‑inflation forecast to 4.7% and shaved global GDP growth to 3.0%, up from the 4.4% and 3.1% it projected in April [1]. The upward revision reflects a 32% jump in crude‑oil prices and a broader petroleum index averaging $89 per barrel, underscoring the inflationary drag that could curb growth and pressure markets.

Inflation drivers and growth outlook

The IMF attributes the higher inflation forecast to a sustained supply shock from the Strait of Hormuz, which routes roughly 20% of world oil and LNG. The disruption, triggered by hostilities in February 2026, has kept crude prices near $89 / bbl, a 32% increase over the baseline used in the January outlook. Higher energy costs have spilled over into food and fertilizer prices, widening the overall price impact. The fund expects inflation to ease to 3.9% in 2027 if the strait reopens gradually from mid‑July 2026, but the 2026 outlook now reflects a stalled disinflation trend that began in early 2024.

Growth projections were trimmed by 0.1 percentage point, with the IMF noting that the Middle East conflict has deepened the slowdown rather than receded. The United States remains an outlier, with growth held at 2.3% for 2026, insulated by its net‑energy‑exporter status. By contrast, the eurozone’s 2026 growth forecast sits at 1.1%, pressured by higher energy costs and limited benefit from the global AI‑driven tech boom that is buoying advanced‑hardware exporters.

Persistence of inflation in advanced economies

A Federal Reserve note finds that the inflation process has become more inertial in major advanced economies, even after accounting for energy‑price shocks and supply disruptions. Using a backward‑looking Phillips‑curve framework, the authors observe that lagged inflation now plays a larger role in core‑inflation dynamics, implying that policymakers may need tighter monetary stances to counter renewed supply shocks [2]. The euro area, in particular, shows heightened vulnerability to energy‑price spikes, aligning with the IMF’s view that the region’s growth outlook is especially sensitive to the ongoing oil price shock.

What to watch

• July 2026 IMF update – any further revision to the oil‑price assumption or inflation outlook.
• Federal Reserve policy meetings – minutes and statements on inflation persistence and required rate adjustments.
• Strait of Hormuz developments – any de‑escalation that could lower oil prices and ease inflation pressures.

The revised IMF forecasts signal that persistently high inflation, driven by geopolitical energy shocks, may dampen global growth more than previously expected. How central banks respond to the heightened inflation persistence will be a key determinant of market trajectories in the coming months.