The global economy is set to face a prolonged period of high benchmark interest rates due to the economic consequences stemming from the conflict involving the US, Israel, and Iran. According to the Operative Information Center-OMM, this outlook was detailed in a recent report by Bloomberg.
The report indicates that central banks in the world's leading economies are expected to maintain elevated benchmark interest rates at least until 2028. Analysts project that by the end of 2026, the average benchmark interest rate will reach 5.1 percent, a significant increase from the 4.41 percent forecast issued in January, prior to the escalation of the conflict involving Iran.
Projections further suggest that by the end of 2027, this figure will moderate to 4.5 percent, which remains 0.75 percentage points higher than previous January estimates. Similarly, the forecast for 2028 exceeds earlier assessments by approximately 0.5 percentage points.
The report attributes these inflationary risks to several factors, including the energy crisis triggered by the potential disruption of shipping through the Strait of Hormuz during the conflict, as well as the rapid integration of artificial intelligence technologies. This analysis encompasses 23 countries that collectively account for approximately 90 percent of global Gross Domestic Product (GDP).
High interest rates are a primary tool used by central banks to combat inflation by increasing the cost of borrowing, which in turn slows down consumer spending and business investment. When geopolitical instability threatens energy supplies, central banks often maintain these restrictive monetary policies longer than anticipated to prevent price volatility from becoming entrenched in the broader economy.
