Bloomberg Economics Sees Higher Global Interest Rates Lasting Through 2028

The recent conflict between the United States and Iran could have lasting consequences for global monetary policy, with Bloomberg Economics forecasting that interest rates may remain higher than previously expected through 2028.

Bloomberg Economics expects central banks to keep borrowing costs elevated amid lingering inflation pressures.

According to Bloomberg Economics, projections for policy interest rates have increased by as much as 0.5 percentage point compared with forecasts made before the conflict.

The revised outlook reflects continuing inflation risks, including those associated with higher energy costs following disruptions in the Strait of Hormuz, as well as potential inflationary pressures linked to rapid artificial intelligence adoption.

Bloomberg Economics said consumers and businesses may face a prolonged period of higher borrowing costs, including more expensive loans and mortgages.

Earlier this year, the research group expected the Federal Reserve System to reduce interest rates by a full percentage point by mid-2027. It now expects only a single 0.25-percentage-point rate cut over that period.

The European Central Bank is also projected to raise rates to a level about 0.5 percentage point higher than previously anticipated before easing policy later.