U.S. Economic Forecast: April 2026

Impact of Geopolitical Tensions on Inflation

Recent geopolitical events, particularly the ongoing conflict involving Iran, have triggered a short-term surge in inflation. Rising oil prices are driving up overall inflation rates, diminishing real incomes, reducing consumer spending, and causing delays in anticipated Federal Reserve policy adjustments.

March Inflation Reverses Disinflation Trend

Energy costs have rapidly increased, resulting in higher prices at gas stations and ending a two-year period of declining inflation. With oil prices remaining high and uncertainty persisting in the Middle East, inflationary pressures are expected to intensify. Projections indicate that headline PCE inflation will reach an annual rate of 3.7% in the second quarter, while core PCE is likely to stay elevated between 2.7% and 3.1%.