IMF: US inflation won't hit 2% target until late 2027 due to Iran war, oil prices

The U.S. inflation rate is not expected to return to the Federal Reserve's 2% target until the end of 2027, according to the International Monetary Fund (IMF). This revised forecast pushes the timeline back by six months from previous projections.

The primary driver for this delay is the surge in oil prices, which the IMF attributes to the ongoing conflict in the Middle East involving Iran. These higher energy costs are expected to prolong inflationary pressures within the U.S. economy.

In addition to the impact of oil prices, the IMF also acknowledged the gradual effect of tariffs implemented by the Trump administration. These trade policies have been progressively contributing to the rising cost of living in the United States.

"We observe renewed pressure on headline inflation due to rising oil prices as a consequence of the war in the Middle East. We currently project that U.S. inflation will return to the 2% target, with some delay, by the end of 2027," stated IMF spokesperson Julie Kozack during a press conference. Kozack also advised that the Federal Reserve must proceed cautiously with monetary policy adjustments, carefully monitoring available data and maintaining clear communication.

The Federal Reserve is scheduled for its next policy meeting on June 16-17. The new Fed chair, Kevin Warsh, faces the challenge of managing price increases, with April's year-on-year inflation standing at 3.8%, significantly above the 2% goal. Warsh's nomination by Trump suggests a potential willingness to lower interest rates, adding another layer of complexity to the inflation fight.