San Francisco Fed Study: El Niño May Have Lifted U.S. Prices by 0.3 Point, Posing Inflation Risk for 2027
An Economic Letter published by the Federal Reserve Bank of San Francisco on November 2 estimates that the current El Niño episode may already have raised the U.S. personal consumption expenditures (PCE) price level by about 0.3 percentage point between April and July of this year. The researchers expect that initial effect to fade by the end of 2026, but warn that if El Niño transitions into La Niña next year, renewed price pressures could add as much as 1 percentage point to PCE inflation over the course of 2027.
The study, by San Francisco Fed researchers Molly Ardren, Tobin Graf and Brigitte Roth Tran, is based on Roth Tran's Working Paper 2026-21. The National Oceanic and Atmospheric Administration (NOAA) currently classifies this El Niño as "very strong"; of the 22 El Niño events recorded since the 1950s, only four reached that category, and the World Meteorological Organization has projected that this episode could produce a record rise in ocean temperatures.
The historical analysis finds that El Niño's price effects run mainly through food and core services prices. On employment, nonfarm payrolls change little in the first year of an El Niño but tend to grow markedly in the second year, with unemployment falling — suggesting any jobs boost from this episode would arrive in 2027.
The authors stress that the findings carry substantial uncertainty, given the small historical sample and the possibility that this episode exceeds past peaks. The results, they write, are not a forecast but point to a meaningful upside risk to U.S. inflation next year, adding one more variable for a Federal Reserve already focused on inflation.
(Source: Federal Reserve Bank of San Francisco)
Source: Federal Reserve Bank of San Francisco
Published by GSM · USA (original Chinese edition)
Photo: 图：旧金山联邦储备银行大楼。照片 CC BY-SA 4.0，经 Wikimedia Commons。 / Photo: The Federal Reserve Bank of San Francisco building. CC BY-SA 4.0, via Wikimedia Commons.
