Shoppers in New York (Michael Nagle/Bloomberg)
March 27, 2026 9:40 AM, EDT
Economists raised their estimates for U.S. inflation through year-end, while trimming consumer spending, growth and employment projections as the war in Iran drives up fuel costs.
The personal consumption expenditures price index is now seen rising 3.1% on average this year, compared to a prior estimate of 2.6%, according to the latest Bloomberg monthly survey of economists.
While that’s primarily due to higher oil prices, forecasters also expect another metric that strips out food and energy costs to advance more than previously estimated.
Economists see a more limited impact on gross domestic product — projecting growth to average 2.3% this year, softer than the prior estimate of 2.5%. The latest downgrade to GDP estimates partly reflects tamer consumer spending in the first half amid uninspiring job creation.
Respondents also pushed out their forecasts for Federal Reserve interest-rate cuts, with the first reduction now seen in September.
The conflict is already impacting American households, which are experiencing higher gasoline prices and airfares. There is also a risk that the disruption in the supply of fertilizer eventually leads to higher grocery bills, while rising transportation costs could permeate into consumer goods prices.
The Bloomberg survey mirrors new estimates by the Organization for Economic Cooperation and Development, which sees higher inflation in the U.S. and other major economies. The OECD now expects the average inflation rate for the Group of 20 this year to jump to 4%, rather than the 2.8% it predicted in December.
Economists in the Bloomberg survey raised the odds of a U.S. recession in the next 12 months to 30% from 25% previously, the survey showed. They cut their forecasts for average monthly job growth this year — to 43,000 from a prior projection of 70,000 — and now see the unemployment rate averaging 4.5%.
Due to the evolving conflict in the Middle East, the outlook for the global economy is highly uncertain, with significant downside risks.
Under our updated baseline scenario we now project global GDP growth at 2.9% in 2026 and 3.0% in 2027. pic.twitter.com/yIzsbQBYqb
— Mathias Cormann (@MathiasCormann) March 26, 2026
Even if Washington and Tehran can agree to end hostilities soon, analysts caution it will take time for oil shipments through the Strait of Hormuz to normalize. Damage to oil infrastructure in the region, combined with increased global demand as countries rebuild stockpiles after the conflict, are likely to keep energy costs elevated for longer.
“The tail effects of the closure of the Strait of Hormuz are still long,” said Diane Swonk, chief economist at KPMG. “Production idled takes longer to ramp up than shut down.”
The Bloomberg survey of 79 economists was conducted March 20-25.
