A potentially record-breaking El Niño could push US prices higher in 2027, complicating the Federal Reserve’s efforts to control inflation even as the weather pattern may support employment, according to research by the Federal Reserve Bank of San Francisco.
The World Meteorological Organization warned in October that the current El Niño could rank among the strongest on record, potentially driving ocean temperatures to record levels in the coming months.
- El Niño may have increased US headline price levels by 0.3 percentage point between April and July 2026, with that initial effect expected to fade by year-end.
- San Francisco Fed researchers warn that the weather pattern could push prices up by as much as 1 percentage point in 2027 while potentially supporting employment.
- The inflation risk adds uncertainty to the Federal Reserve’s outlook as policymakers contend with elevated prices, energy costs and expectations of further interest rate increases.
According to Reuters, the phenomenon can cause drought in some regions, flooding in others and unusually high temperatures across large parts of the world.
The 2026 Atlantic hurricane season has entered October without a single storm reaching hurricane strength, an unusually quiet stretch that has pushed forecasters to cut their seasonal projections. AccuWeather now sees a growing possibility that the season ends without a hurricane, something not recorded since 1914.
A strengthening El Niño has contributed to the weak Atlantic activity. AccuWeather has repeatedly revised its hurricane forecast downward as stronger wind shear and dry air have made conditions less favorable for tropical development.
Federal forecasters expect El Niño to strengthen further through the end of the year. NOAA’s Climate Prediction Center puts the probability of a very strong El Niño during fall and winter 2026-27 above 90%, with a 75% chance that the October-December period reaches a level exceeding previous El Niño events dating back to 1950.
El Niño could raise US price levels by 1 percentage point in 2027
Researchers at the San Francisco Fed estimate that El Niño may already have contributed to higher US consumer prices during 2026, with a potentially larger inflationary effect emerging next year.
We estimate that the current episode may have already increased headline price levels about 0.3 percentage point between April and July of this year
The estimates point to that initial rise fading by the end of this year but then potentially pushing prices up in 2027 by as much as 1 percentage point.
A potentially record-breaking Super El Niño is expected to become a major influence on Northern Hemisphere weather during November 2026, as unusually warm Pacific Ocean temperatures alter atmospheric circulation and shift storm tracks across North America and Europe.
The event has strengthened since spring and is forecast to approach peak intensity around December. Some climate models indicate it could become the strongest El Niño in more than 70 years, with temperature anomalies in the central equatorial Pacific projected to exceed +3°C.
The developing atmospheric response is already visible. Rising air over the central and eastern tropical Pacific and sinking air over the Maritime Continent indicate substantial changes in tropical circulation that can influence weather systems thousands of miles away.
November forecasts show several characteristics associated with historically strong El Niño events across the United States and Canada. The northern United States is generally expected to experience warmer conditions, with a more active southern storm track increasing precipitation risks farther south.
Europe faces a less consistent outlook. Early November circulation patterns differ from those typically associated with strong El Niño events, while forecasts of an unusually early weakening of the polar vortex introduce the possibility of colder conditions later in the month.
The competing influences are particularly relevant for the winter 2026/2027 outlook. El Niño generally favors warmer conditions across northern North America, but disruptions of the stratospheric polar vortex can sometimes produce persistent high-pressure blocking patterns that allow Arctic air to move southward.
Higher inflation risks complicate Federal Reserve interest rate policy
The findings introduce another potential source of inflationary pressure for the Federal Reserve, which has struggled to return inflation to its 2% target for more than five and a half years.
Successive economic shocks have complicated that effort, including pandemic-related supply chain disruptions, substantial tariff increases introduced in 2025 and higher global oil prices following the outbreak of war in Iran earlier in 2026.
The central bank is also assessing inflationary pressures associated with demand for artificial intelligence-related goods and services. Financial conditions, meanwhile, remain insufficiently restrictive in the assessment of some analysts.
After leaving interest rates unchanged last week, the Fed is widely expected to increase its benchmark policy rate in December, followed by another increase in 2027, as policymakers seek to contain persistent inflation.
Global supply chain disruptions add uncertainty to El Niño forecasts
The economic consequences of the current El Niño remain difficult to predict, according to San Francisco Fed research associates Molly Ardren and Tobin Graf and senior economist Brigitte Roth Tran.
Advances in weather forecasting have improved the ability of businesses, households and policymakers to anticipate and prepare for extreme weather compared with previous decades.
Greater integration of international markets, however, could leave the US economy more exposed to economic disruptions originating overseas.
The researchers also cautioned that existing disturbances in commodity and energy markets, alongside unusually severe weather, could alter the economic consequences of the current El Niño.
More recent developments like the disruptions to the fertilizer market, supply chain disruptions in energy markets, and record-setting weather events could also interact with this El Nino in unexpected ways.
Those uncertainties make the projected increase in inflation a potential risk rather than a certain outcome, even as historical evidence suggests that El Niño may also provide a boost to US employment in 2027.
November forecasts for North America display several characteristics historically associated with strong El Niño events, particularly warmer conditions across northern regions and increased precipitation along southern storm tracks.
The Weather Company’s November outlook favors above-average temperatures across much of the United States, especially the northern tier, Midwest and Great Lakes.
