Why might shopping at supermarkets become more expensive by 2027?

Why Schroders Downgraded 2026 Global GDP Growth Forecast to 2.5%

Schroders has lowered its 2026 global GDP growth forecast to 2.5% (previously 2.9%), primarily due to the following core factors:

Direct inflationary shock from Middle East geopolitical tensions: Schroders originally expected global growth to exceed expectations in early 2026, but geopolitical events in the Middle East triggered a direct inflationary shock, forcing it to trim growth forecasts . Schroders estimates that the spillover effects of the Middle East conflict have contributed approximately one percentage point to global inflation .

Persistently high energy prices: Energy prices dominated market trends in the short term. Schroders assumes in its baseline forecast that energy prices will remain at a high level of $100 per barrel until the third quarter of 2026 .

Why the Eurozone and UK Are More Vulnerable Than the US in This Energy Shock

According to research reports from Schroders, the IMF, and other institutions, the Eurozone and the UK are more vulnerable than the US in this energy shock, mainly due to significant differences in three key dimensions: energy import/export structure, fiscal buffer space, and the initial state of domestic economic fundamentals.

Fundamental differences in energy structure: Net exporters vs. net importers As a net exporter of energy, the US has a much lower exposure to risks associated with disruptions in oil and gas flows compared to most developed economies, making it relatively insulated from global energy shocks . Due to its energy self-sufficiency, the US can even gain some buffer from favorable terms-of-trade effects resulting from rising energy prices . In contrast, the Eurozone and the UK are typical net importers of energy .

Facing Inflationary Pressure, Why the Fed, ECB, and BoE Are Unlikely to Raise Rates in 2026

Faced with dual pressures from inflation and geopolitics, markets once anticipated that the Federal Reserve, European Central Bank, and Bank of England would adopt aggressive rate hikes. However, research from Schroders and other institutions suggests that these major central banks are likely to adopt a stance of ‘hawkish talk but no action’ in 2026, based on the following core logic:

Core inference: Economic slowdown eliminates the risk of ‘second-round inflation effects’ This is the fundamental basis of Schroders’ argument. Schroders points out that compared to the commodity price shock after the Russia-Ukraine conflict in 2022, current global economic momentum is significantly weaker, policy stimulus is far less robust than back then, and ordinary households lack large savings buffers .

With Inflation Still Above Target, How Long Will Mortgage and Auto Loan Pressures Persist for Ordinary People If the Fed Waits Until 2027 to Cut Rates

For ordinary Americans, the high-pressure environment for mortgages and auto loans will persist at least until 2027.

Specifically, the duration of high interest rate pressure and the path of rate cuts are determined by several key factors:

High interest rates will continue throughout 2026 (no change): Schroders’ baseline forecast believes that the Federal Reserve will not consider rate cuts at all during 2026, instead keeping policy rates at current high levels until a return to an easing (rate-cutting) cycle in 2027 . This means the existing high-interest-rate environment will last fully through 2026.

How the Projected 38% Surge in Fertilizer Prices Combined with Extreme Weather Will Drive Up Global Food Prices Again in 2027

The combined effect of a projected 38% surge in fertilizer prices and extreme weather will trigger profound impacts through the following chain mechanisms within agricultural supply chains characterized by production cycle lags, ultimately leading to another rise in global food prices in 2027:

Step 1: Raw Material Shortages and Soaring Fertilizer Prices (Supply-Side Cost Shock) The global supply of fertilizers and their production raw materials has been severely disrupted due to geopolitical conflicts in the Middle East, such as the blockade of the Strait of Hormuz and shortages of fertilizer feedstocks in the Gulf region . This has caused agricultural input costs to skyrocket: the World Bank’s report projects that average fertilizer prices will surge by as much as 38% this year (the IMF’s baseline forecast also anticipates a 26% increase in fertilizer prices ). Step 2: “Superimposition” of Extreme Climate Disasters While planting costs spiral out of control due to rising fertilizer prices, agricultural production is simultaneously facing inclement weather.

What Food Security Crisis Will Low-Income Countries Face Amidst Soaring Grain and Fertilizer Prices

Low-income countries in South Asia and Sub-Saharan Africa are facing an extremely severe and profound food security crisis amidst soaring grain and fertilizer prices. The core impacts and transmission mechanisms are as follows:

Smallholder Farmers Face the Fatal Dilemma of “Losing the Bidding War” In low-income countries in South Asia and Sub-Saharan Africa, a significant portion of the local food supply comes from smallholder farmers . When global fertilizer and energy markets experience supply chain disruptions and price spikes, these undercapitalized smallholders are fundamentally unable to compete with wealthy nations’ counterparts to bid for scarce fertilizers, agricultural inputs, or imported grains . Unable to afford fertilizers, smallholder farmers are forced to reduce application rates, which directly leads to a substantial decline in crop yields, thereby contracting local food supplies and sharply worsening food security conditions .

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Source institutions：Schroders

This content is for reading and understanding research reports. It does not constitute investment advice or trading signals.