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Geopolitical conflicts, logistics disruptions, the war in the Middle East and drought linked to El Nino are hitting the global economy at the same time, turning breaks in oil and food supply into a combined shock that is keeping inflation persistently high, according to figures compiled by the Anadolu Agency correspondent from the UN Food and Agriculture Organization (FAO), the World Bank and international financial institutions.

Declining inventories and higher energy and freight costs are expected to keep the crisis caused by inflation running until 2027. Brent crude has moved above $114 a barrel and US West Texas Intermediate (WTI) climbed past $101, ranking among the biggest drivers of inflation through both direct and indirect channels.

Central banks move on interest rates

Monetary authorities, criticized in the past for responding too late to the inflation wave, are this time launching a new tightening cycle without taking risks. Policy makers have taken a series of steps recently against rising inflationary pressures in the global economy, pursuing an aggressive tightening path on interest rates.

The ECB raised its policy rate by a total of 50 basis points this year, lifting the deposit rate to 2.50%. The US Federal Reserve (Fed) raised its policy rate by 25 basis points to a range of 3.75-4.00% in response to inflationary pressures, its first increase since 2023. The Bank of Japan (BoJ) raised rates in June and then again at its September meeting, taking the policy rate to 1.25%.

New Zealand, Pakistan, Australia and South Korea also joined the global tightening wave with rate increases, while Sweden and Switzerland are expected to raise rates in the near future. Three major central banks are set to announce new monetary policy decisions this week.

The effects of high energy prices on the global inflation outlook and concerns about the sustainability of artificial intelligence investments are being watched closely. The Fed's rate decision will be announced on Wednesday, October 28, the ECB's on Thursday, October 29 and the BoJ's on Friday, October 30. The three central banks are expected to hold policy rates steady at this week's meetings and raise them again at their final meetings of the year in December.

Key takeaways

• The FAO Food Price Index rose 1.5% in September to 136 points, its highest level since November 2022 and 5.8% above a year earlier.
• Red Sea insecurity has pushed freight rates between the Black Sea and Southeast Asia up 50%, while wheat prices rose more than 30% in 2026.
• The ECB estimates the 2026 European heat and drought could add 0.3-0.8 percentage points to euro area food inflation next year.
• The ECB, the Fed and the BoJ are expected to hold rates this week but tighten again in December.