U.S. Federal Reserve and climate‑linked food price spikes drive global inflation

Despite successive interest‑rate hikes by central banks, inflation remains above target in most major economies, challenging the narrative of a "soft landing" for the world economy. The U.S. Federal Reserve’s preferred inflation rate has yet to reach its 2% goal, standing at 4.1% in May, keeping price pressures high and market volatility elevated.

At the same time, extreme weather events and ongoing conflicts in the Middle East and Ukraine are tightening agricultural supply chains. Heatwaves in Europe have already cut grain and olive‑seed harvests by about 9 million tonnes, inflicting roughly €2 billion in losses, while the looming El Niño threatens further droughts and floods that could depress yields of wheat, corn, rice, soy, coffee, cocoa, sugar and palm oil worldwide. These developments are prompting investors, traders and international organisations to warn of a new round of food‑price inflation that could compound the broader economic slowdown.