The Bank of France revised its inflation forecast for 2026 upward Thursday, citing the ongoing war in Iran and its ripple effects on global energy markets. The central bank now expects price pressures to stay elevated longer than previously anticipated.
Why the forecast changed
The revision hinges on the war's impact on oil and gas supplies. Iran, a major oil producer, remains embroiled in conflict, and the resulting uncertainty has pushed global energy prices higher. That feeds directly into inflation, especially in a net energy importer like France. The bank's previous projections didn't account for a prolonged disruption in the region.
The new numbers
The central bank did not disclose the exact inflation rate it now expects for 2026, but the adjustment signals that policymakers see the energy shock as persistent rather than temporary. The forecast covers the full year, meaning the bank expects higher prices to linger through 2025 and into 2026.
Broader context
France, like much of Europe, has grappled with inflation above the European Central Bank's 2% target for more than two years. The Iran war adds a fresh layer of pressure. While European natural gas storage levels are relatively healthy, any supply disruption in the Middle East can still rattle markets and hit household bills.
What comes next
The Bank of France is expected to release detailed economic projections alongside its next quarterly report. Market watchers will look for whether the revised inflation outlook prompts the ECB to adjust its own rate path. For now, the central bank is sticking to its message that inflation will gradually ease — just not as fast as it thought.
