A report from the OECD that has just come out projects that U.S. inflation will hit 4.2% this year, this is much higher than the Fed's original estimate of 2.7%. This gap is mainly be driven by the war in Iran which is disrupting the oil flow from the Strait of Hormuz. Since the Middle East is so important to the global oil supply, the risk of a long-term war has already pushed oil prices past $100 a barrel. This has made everything more expensive for both producers and consumers.
A big concern is that the Fed may be too optimistic and we end up with higher interest rates for a much longer period than expected. The length of the war in Iran could have a big impact on the housing market and negatively affect mortgage demand. It seems as though all progress that was made on decreasing inflation has been erased by the conflicts in the Middle East.
Source: https://www.cnbc.com/2026/03/26/global-forecasting-group-sees-us-inflation-at-4point2percent-this-year-much-higher-than-fed-estimate.html
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