The Organization for Economic Co-operation and Development (OECD) has warned that inflation is increasing in the US, with headline inflation set to rise from 2.6% in 2025 to 4.2% in 2026, a 1.2 percentage-point increase from the December 2025 forecast. This comes as the Middle East energy shock pushed headline inflation to its highest level in four years. The Federal Reserve is expected to maintain interest rates while the expected growth boost for the US economy has largely disappeared. The OECD projects core inflation, excluding food and energy, at 3% in 2020, still above the Fed’s 2% target through the full year. The most likely 2026 scenario for Fed interest rates is now zero or one cut, with 0-cut odds at 28.2%, and 1-cut at 25.5%. There is a 97.7% probability that U.S. inflation will exceed 3%.