Global Economic Outlook: September 2026

Key issues to highlight in S&P Global Market Intelligence's September forecast update include:

• Renewed, and broadening, upward pressure on energy prices. 
• More tightening from major central banks and rising sovereign yields.  
• Resilient global economic conditions, but risks increasing.  

Why are energy prices again testing forecast assumptions?

The recent increases in crude oil prices have exceeded the higher assumptions feeding into our latest round of forecast updates. The current base case from S&P Global Energy, termed “contested recovery,” incorporates end-2026 and end-2027 Dated Brent crude prices of US$89/barrel and US$86/barrel, respectively, up from the prior forecast round. 

Heightened supply concerns have driven the spot Brent crude price back above US$100/barrel. Although still below late April’s high, the average price over the first half of September represents an increase of more than 40% compared with early July’s low following the US-Iran Memorandum of Understanding.

How broad-based are the latest energy price pressures?

The recent price increases have not been confined to crude oil. Prices of refined products are also elevated amid ongoing capacity shortages, with US diesel prices recently rising above US$6 per gallon for the first time.

Gas prices in Europe have also jumped due to concerns about low storage levels and potential winter shortages. Wholesale prices have risen by more than 30% since late July to exceed €80/megawatt-hour. This is the highest level since late 2022, although still well below the peak in the earlier stages of the Russia-Ukraine conflict.

What do higher energy prices mean for inflation?

Consistent with the new energy price assumptions, our national consumer price inflation forecasts for 2026 and 2027 have generally been revised upward in September’s update, with near-term risks tilted to the upside.

From a monetary policy perspective, the effects of higher energy prices on core consumer price inflation have generally been modest to date. The more persistent the energy shock, however, the higher the likelihood of larger pass-through effects and tighter financial conditions. 

How much further could major central banks tighten?

We expect the European Central Bank’s 25-basis-point rate rise earlier this month to be matched by the US Federal Reserve and the Bank of Japan this week. Futures markets price high probabilities of both moves. Less clear is how far tightening by the three major central banks will ultimately go.

For the European Central Bank, our assessment points to relatively low risks of second-round effects on inflation, suggesting the near-75 basis points of rate hikes priced by early 2027 looks excessive. Tough policy messaging may nevertheless continue as policymakers seek to keep inflation expectations anchored while energy prices rise.

Our base case for the Federal Reserve is “one and done,” although this call is highly sensitive to the trajectory of inflation and labor market data. The Bank of Japan’s faster normalization of monetary policy is likely to continue, with a subsequent rate rise forecast in December. 

Why are sovereign yields still under pressure?

Our long-standing concerns about upward pressure on long-term interest rates are increasingly reflected in market pricing. At around 5%, the 10-year US Treasury yield has risen by roughly 100 basis points compared with its pre-US-Iran war levels. The increases in two of Europe’s most fiscally challenged economies, the UK and France, have been even larger.

The US Treasury’s enlarged buybacks have done little to stem the tide, and a major change in direction for yields looks unlikely near term in the absence of positive news from the Middle East. Clearer acknowledgement by governments of the need to address stretched public finances would help, although that may require more pronounced market pressure.

What are PMI data signaling about global economic conditions?

Signals from S&P Global’s Purchasing Managers Index data were again upbeat in August. Following its fifth straight improvement, the global composite output index is indicative of the highest rate of global growth—around 3% annualized—since mid-2024. A further improvement in September’s flash PMI data, released on Sept. 23, would be notable given the adverse recent developments highlighted above. 

What are the key growth forecast changes this month?

Following stronger-than-expected second-quarter GDP releases and in line with the positive signals from PMI data, our 2026 growth forecasts for many major economies were revised upward in prior forecast rounds. September’s update included some further, generally more modest, upward revisions.

India was a standout, with strong data in the first quarter of the current fiscal year leading us to revise up our full-year growth estimate by 0.3 percentage point to 6.5%.

How wide is the range of potential outcomes?

For energy prices and the broader macroeconomic environment, the range of potential outcomes remains unusually wide. We have previously flagged a chain reaction of conflict-related developments as a downside risk to what remains a relatively benign base case for the global economy amid a significant energy shock.

In that risk scenario, escalating US-Iran tensions drive up energy prices, monetary policy tightening steps up, long-term interest rates reach higher peaks and risk assets, including equities, correct. This is not our base case, but recent developments suggest that this type of outcome cannot be ruled out.