Global Disinflation Has Stalled: Why G20 Inflation Is Rising Again in 2026

The proximate cause is straightforward: the Middle East conflict that ran from late February through mid-June 2026 triggered a sharp spike in energy prices, and the IMF's current forecasts are built on an assumed average oil price of roughly $89 per barrel for the year — well above pre-conflict levels even after the post-ceasefire price decline. Higher energy costs flow through to food prices and to broader input costs across manufacturing and logistics, the standard transmission mechanism behind a supply-driven inflation shock.

This is a meaningfully different kind of inflation problem than the demand-driven surge of 2021-2023. A supply shock — like a war-driven spike in energy prices — pushes up prices without necessarily reflecting excess demand in the economy, which changes how central banks are advised to respond.

The guidance to central banks reflects that distinction: where inflationary pressure is visible but judged temporary, and where inflation expectations remain anchored, central banks are advised to keep real interest rates broadly constant over a reasonable horizon — which can still imply raising nominal policy rates to keep pace with higher inflation, even without tightening in real terms. A supply-driven price rise need not automatically trigger an aggressive policy response, provided the public still expects inflation to come back down over time.