High inflation to persist globally into next year, Reuters poll shows

BENGALURU, Oct 27 (Reuters) - High inflation will persist in the global economy well into next year, according to hundreds of economists polled by Reuters, who are now increasingly concerned that price pressures will become entrenched beyond rising energy costs caused by the conflict in the Middle East.

More than $1 trillion of investment in artificial intelligence technology globally since last year has made some economies more resilient at a time when cost of living pressures are squeezing households and shaping national politics.

Most central banks have raised interest rates only a few times or not at all, but more could come if inflation pressures broaden. A global rout in bond markets in recent months has also tightened financial conditions through higher yields.

Crude oil prices, which have stayed above $100 a barrel since October 7, hit a six-month high of over $117 last week and are up more than 60% since the US-Israeli war with Iran began almost eight months ago.

Even forecasters who did not anticipate a quick end to the war are now sounding more concerned about inflation resurgence, particularly given the resilience of global growth.

More than 500 economists Reuters surveyed globally this month raised their 2027 inflation forecasts for 31 of the 50 economies polled on and growth forecasts for 23 of them.

"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."

Economists raised 2027 inflation forecasts for 15 of 21 developed economies covered.

That suggests inflation worries are spreading and affecting economies that typically experience low price pressures.

Cumulatively, median forecasts for 2027 inflation over the past three quarterly polls have risen by 0.7 percentage points for Britain, 0.5 percentage points for the euro zone and only 0.2 percentage points so far for the US. They have risen by 0.4 percentage points for India and by 0.5 percentage point for Brazil.

"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," Seth Carpenter, global chief economist at Morgan Stanley, said in a note.

"The inflation picture has become more complex as signs of energy pass-through into core measures are beginning to emerge."

The effects of rising prices on household budgets have taken centre stage in various political campaigns across the world. Opinion polls show voters ahead of US midterm elections on November 3 are preoccupied with these issues and Brazil's presidential election, which gave incumbent Luiz Inacio Lula da Silva his fourth non-consecutive term, was also fought on cost of living issues.

In contrast to two previous polls in April and July, which painted a weak-growth, high-inflation scenario, the latest forecasts lean towards one where price pressures accompany more robust economic performance.

Economists upgraded their global growth forecasts for both this year and next, to 3.0% and 3.2%, respectively, from 2.9% and 3.1% in the July poll, though the 2027 forecast is lower than the 3.4% the International Monetary Fund is predicting.

The US, which leads in AI capital expenditure that has now become the main driver of domestic growth, is forecast to expand 2.3% this year and 2.1% in 2027.

(Other stories from the Reuters global economic poll)​

(Reporting by Hari Kishan; Polling, analysis and additional reporting by the Reuters Polls team in Bengaluru and bureaus in Buenos Aires, Cairo, Istanbul, Shanghai and Tokyo; Editing by Ross Finley and Tomasz Janowski)