Updated · Federal Reserve Bank of San Francisco · Nov 2
San Francisco Fed Sees El Niño Lifting U.S. Prices 0.3%, Risking 1% Inflation in 2027
Updated
Updated · Federal Reserve Bank of San Francisco · Nov 2
San Francisco Fed Sees El Niño Lifting U.S. Prices 0.3%, Risking 1% Inflation in 2027
3 articles · Updated · Federal Reserve Bank of San Francisco · Nov 2
Summary
A San Francisco Fed analysis estimates the current El Niño already lifted U.S. PCE price levels by about 0.3 percentage point between April and July, with that bump likely to fade by year-end.
A 1 percentage point rise in 2027 prices is the bigger risk, but the model ties that outcome largely to El Niño being followed by a La Niña next year; without La Niña, it finds no further net price effect.
Core services and food prices have historically driven much of the inflation impact, while employment and unemployment typically improve in the following year, pointing to possible labor-market gains in 2027.
Only 22 El Niño episodes since the 1950s underpin the study, including just four very strong ones, and the current event is projected to be stronger than any in the sample.
The Fed paper frames the findings as added uncertainty for the economic outlook rather than a forecast, reflecting both weather-path uncertainty and the possibility that modern global markets react differently than in past episodes.