IMF: "US Inflation Cannot Be Controlled Even After Iran War Ends"...Warning of Aftermath Until 2027

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The International Monetary Fund (IMF) has warned that while the Iran war resulted in a smaller growth shock than expected, it could leave an indelible mark on US inflation until the end of 2027.

According to MarketWatch, an economic media outlet, on July 8 (local time), the International Monetary Fund (IMF) diagnosed that while international oil prices fell faster than expected after the unstable truce between the US and Iran, the inflation shock had already occurred. The IMF projected that even assuming the Iran war ends, US inflation would be unlikely to approach the Federal Reserve's (Fed) target of 2% by the end of 2027.

US inflation fell to 2.3% in early 2025 but then surged to 4.1% last May. Economists pointed to the aftermath of US President Donald Trump's tariff policies and the sharp rise in international oil prices after the outbreak of the Iran war at the end of February as major reasons. On Wednesday, when truce instability resurged, international oil prices jumped 6% and US stock index futures also declined.

However, US economic growth appears to have avoided a major blow. The IMF expects US Gross Domestic Product (GDP) to grow by 2.3% in 2026 and 2.2% in 2027, maintaining a level similar to its previous forecasts. The US economy grew by 2.8% in 2024, then slowed to 2.1% in 2025. The global economic growth forecast for 2026 was also presented at 3%.

The IMF assessed that "the global economy as a whole has so far withstood the war's impact better than feared." It further explained that "economies in various countries have become less energy-intensive than they were just a few years ago," indicating a reduced sensitivity of economies to oil and gas price shocks.

The situation in the Middle East and the fervor for artificial intelligence (AI) investment were identified as new risk factors. The IMF stated, "We expect policy and geopolitical uncertainties to remain high until 2027." It also warned that "AI hype and overheated financial markets" could sow the seeds of economic instability.

[Article Key Summary]

-The IMF projected that US inflation would struggle to approach the Federal Reserve's 2% target by the end of 2027 due to the ongoing inflation shock from the Iran war.

-US inflation rose from 2.3% in early 2025 to 4.1% last May, but the economic growth forecast for 2026 remained at 2.3%.

-The IMF identified geopolitical uncertainty in the Middle East, AI hype, and overheated financial markets as additional economic risk factors.

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