The International Monetary Fund (IMF) warned on Tuesday that price increases for necessities like food and energy will stay high for longer than experts expected, driven by ongoing wars in Iran and Ukraine.

The fund said families face more than just a temporary spike in costs. They now deal with a permanent drop in how affordable basic items are compared to other goods.

Global prices for many commodities have stayed high for several years. Pandemic supply chain problems started the trend, then wars in Ukraine and Iran made things worse.

The war in Ukraine disrupted supply chains for many food products and energy. The US-Israel war on Iran has sent energy and fertilizer prices soaring after a key Gulf supply route closed.

Prices stay high longer than expected

“We find that the prices of necessities relative to other goods continue rising for more than a year after the start of a typical episode, and remain persistently elevated,” the IMF said in a blog post with its new report.

“As a result, people face not only a temporary spike in food and energy costs, but a lasting deterioration in the affordability of essentials relative to other items.”

Households worldwide have struggled with cost-of-living increases due to the wars and the pandemic. Wages have not kept up with ongoing price pressures.

Wars push inflation higher

The Iran war, which started in February this year, has pushed global inflation higher. The IMF upgraded its forecast for the metric to 4.7% worldwide in 2026, compared to 4.1% the year before.

The IMF will release the main portion of its World Economic Outlook update next week, with new figures for global growth and inflation forecasts.

Tuesday’s report is part of that release. It focuses on lessons learned from the cost-of-living crises of the last five years.

The IMF warned that the consequences of supply shocks extend far beyond “a few months of higher inflation.”

Central banks across the world have started raising interest rates to combat the inflation.

Raising the key rate of an economy can help fight higher prices, but it also tends to slow economic activity. This creates a difficult balancing act in developing countries that may not be able to afford the slowdown.

Working families bear the brunt

The report said that the ongoing inflationary pressures threaten macroeconomic stability for many countries.

“Inflation remains elevated long after the initial surge in food and energy prices,” it said.

“Inflation expectations also rise and stay above pre-crisis levels for years, suggesting that these episodes may complicate efforts by central banks to control inflation.”

The burden of those price increases falls hardest on working-class families. For them, spending on necessities is both non-negotiable and forms a larger share of their monthly spending.

As a result, this type of inflation has a major impact on increasing poverty and income inequality.

Targeted help needed

The fund called on countries to avoid broad-based subsidies to combat such crises. Instead, governments should issue “targeted and temporary transfers” to those who need them most.

However, with global debt levels at high levels, many low-income and developing countries lack the fiscal space to do so, especially given the repeated shocks since the pandemic.

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