A strong El Niño could raise inflation in the US by 1 percentage point in 2027 – Fed
Kyiv • UNN
The San Francisco Fed forecasts a possible 1-point increase in US inflation in 2027 due to the shift from El Niño to La Niña. At the same time, employment could increase.
The strong warming of Pacific Ocean waters, known as El Niño, could accelerate inflation in the United States in 2027 while also supporting employment growth. This is according to a study by the Federal Reserve Bank of San Francisco, Bloomberg reports, writes UNN.
Details
Economists estimate that the weather phenomenon may have raised consumer price inflation by approximately 0.3 percentage points from April through July 2026.
Researchers expect this effect to disappear by the end of the year. However, if El Niño shifts to La Niña in 2027, additional price pressures could increase PCE inflation by 1 percentage point.
How weather phenomena affect the economy
El Niño alters weather patterns, affecting the cost of food, services, and economic activity.
At the same time, an analysis of previous cycles showed that in the second year after the onset of El Niño, employment typically increases while unemployment declines.
Scientists caution that the results are not a precise forecast. The study covers only 22 El Niño episodes since the 1950s, and the current phenomenon may prove stronger than all previous events in the sample.