Rates could rise more this year than the Fed has predicted, global forecasting group says – what that means for your money

Consumers continue to feel the effects of inflation on their finances. In February, the Consumer Price Index, which tracks the cost of consumer goods and services, showed a rise of 2.4% over the past 12 months.

And according to another world policy organization, the US war with Iran and its effects on the price of energy, as well as the continued impact of US tariffs, may reduce prices very high for the rest of the year. In a March report, the Organization for Economic Co-operation and Development predicts inflation of 4.2% for 2026.

That’s a marked increase from the group’s previous estimate of 2.8%, and well above Federal Reserve officials’ most recent estimate of 2.7%. The OECD, a conglomerate of 37 governments, is regarded by the US government as a reliable source of policy analysis and economic data.

For investors, periods of high inflation are generally considered problematic. As your portfolio grows over time, inflation creeps up alongside it, eating away at the value of your savings.

“The important thing we remind clients is that inflation quietly erodes purchasing power,” says Joon Um, a certified financial planner at financial firm Secure Tax & Accounting. When it comes to a few percentage points in the CPI, he says, “even a small difference is important.”

Short-term projections for inflation can influence spending and can even wear down the markets in the short term — but it’s important not to let them dictate your long-term strategy, says Doug Boneparth, CFP and founder of Bone Fide Wealth.

“Temporary inflationary noise is just that. It’s noise. The biggest mistake investors make is reacting to it,” he says. “Selling funds due to the publication of the CPI or making a dramatic change in your career based on the data of one month – this is often how people harm themselves in investing in the market.”

The OECD predicts that the price increase will be short-lived. The agency expects US inflation to slow to 1.6% in 2027, below the Fed’s estimate of 2.2% and below the central bank’s long-term target of 2%.

But experts say it is important to remember that inflation is here to stay during your career as an investor. Preparing to overcome its negative effects on your finances should be one of your top priorities, says Boneparth.

“Inflation slows down, and that’s where people underestimate the damage it causes,” he says. “You don’t hear it every day, but over 20 or 30 years, it can reduce purchasing power.”

Consider the old “rule of 72” – a money system that has been around since at least the late 1400s. Traders have often used it as a quick way to estimate the growth of their business. Simply divide 72 by the annual rate of return you expect to earn on your portfolio, and you’ll find the number of years it will take for your investment to double. If you expect an 8% return, your portfolio should double every 9 years, for example.

Because of that equation, you can look at your portfolio now and imagine the wealth you will accumulate in retirement. But remember – this method works in reverse, too. Divide 72 by the rate of inflation you expect in the long run, and you will find the time it takes for your purchasing power to be cut in half. At the current rate of 2.4%, it will happen every 30 years. At 4.2%, it’s like every 17 years.

It’s important, then, to think about your savings in terms of what they can buy you down the road, says Jim Shagawat, a CFP with consulting firm AdvicePeriod.

He says: “A car worth $40,000 today would cost $80,000 in 24 years at a 3% discount, but it would reach that same $80,000 in just 18 years at 4%. “Small differences in the inflation mix turn into big differences in lifestyle.”

To stay ahead of the curve, it’s important to invest regularly in a diversified, core stock portfolio over the long term and avoid leaving too much money in low-yielding accounts, Boneparth says.

“Obviously, there are situations where inflation destroys everything, but the opportunity to beat it is found in finance,” he says. “That is achieved by getting a return on your investment that is greater than what a risk-free asset would give you.”

If you’re not particularly comfortable with inflation, he says, it might be worth talking to a financial advisor about adding assets that are considered “walls” against rising prices. For bond investors, these may include inflation-protected securities, bonds whose value rises with the CPI.

Some traders concerned about inflation may choose gold, real estate or even bitcoin, Boneparth says. Regardless of your preference, if adding a small inflation component to your overall portfolio helps you stay invested and sleep better, “there’s nothing wrong with that,” he says.

“Addressing cognitive biases in long-term portfolios is key to stability,” he says.

When thinking about your long-term goals, it’s important to remember that the type of things you’ll want — and what you’ll have to pay for in the future — can come at a very different price, says Um.

“We’re also seeing consumers underestimate how inflation affects retirement spending — especially health care and day-to-day expenses,” he says. “At the end of the day, inflation is not just a number; it directly affects lifestyle, so portfolios should be built with awareness.”

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