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Cost-of-living crises can leave inflation expectations elevated years after food and energy prices surge, while worsening the pressure on poorer households. Reuters reported on October 6, 2026, that IMF research found near- and medium-term expectations remained above their pre-crisis levels three years after a crisis began. The same research estimated that poverty was more widespread than earlier calculations suggested, and reported that targeted transfers cost less than broad price-suppression measures.
How long can a cost-of-living crisis affect inflation expectations?
In the IMF findings reported by Reuters, near- and medium-term inflation expectations rose significantly during cost-of-living crises and remained above pre-crisis levels even three years after the crisis began. Five-year-ahead expectations rose more modestly at first, but also stayed elevated.
Inflation expectations matter because households and businesses make decisions based partly on what they think prices will do next. The reported findings indicate that a sharp rise in essential costs may have effects beyond the immediate increase in bills. They do not establish how much any particular event caused expectations to change.
Reuters placed the findings against repeated food and energy price shocks, including economic stress after Russia’s 2022 invasion of Ukraine and the Middle East war discussed in its October 2026 report. That is context for the reporting, not proof that the IMF study isolated the causal contribution of either event.
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Why can poorer households face higher inflation?
Households do not all buy the same mix of goods. Food and energy can take a larger share of a poorer household’s budget, so sharp price increases in those necessities may raise its experienced inflation more than a standard measure suggests.
Reuters said the IMF’s new model estimated a 0.8 percentage-point difference between its inflation measure for poorer households and the standard measure. The report also said the model suggested 23 million more people fell below the extreme poverty line between 2021 and 2024 than previously calculated. That figure is a model-based estimate, not a direct headcount.
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The Reuters report does not provide enough detail to independently assess the model, the poverty-line definition, country coverage, or the uncertainty around these estimates. The figures should therefore be read as reported IMF research, not as independently verified counts or a universal measure of every household’s experience.
Which policies can help when food and energy prices surge?
The IMF’s reported preference is targeted transfers: direct support can protect vulnerable households while leaving market prices in place. That matters because prices still signal scarcity and can influence consumption and production decisions. Whether a government can identify recipients and deliver help quickly depends on its systems and circumstances; the reporting does not suggest targeting is effortless or immediately feasible everywhere.
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Reuters reported these cost comparisons from the IMF research:
| Measure | Reported cost relative to targeted transfers | Trade-off described in the reporting |
|---|---|---|
| Price controls and lower consumption taxes | Three to six times as much to implement | Broad price relief can suppress visible prices but costs more, according to the reported comparison. |
| Producer subsidies | 22 times as much to roll out | Subsidized output may be exported, meaning domestic taxpayers can help subsidize consumers abroad. |
| Targeted transfers | Baseline for the reported comparison | Can direct support to vulnerable households while preserving price signals, in the IMF’s reported reasoning. |
These are comparisons as Reuters reported them, not a country-by-country implementation scorecard. The underlying October 2026 IMF chapter was not available in the reporting reviewed, so the precise cost denominators and methods cannot be independently checked from that account. The figures do not show that transfers will always be the fastest or most effective option in every country.
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Why does preparation matter?
Once a crisis is under way, governments may face pressure to act quickly even when effective support systems take time to build. Reuters quoted Shantayanan Devarajan, identified as a Georgetown University professor and former World Bank economist, saying: “You know, they say, ’Fix your roof when the sun is shining,’” before arguing that introducing measures after a crisis hits can be too late and politically difficult. Reuters said he made the remarks in a videotaped discussion released with IMF economist Chiara Maggi.
Maggi, who co-led the research, summarized its implications this way: “In a nutshell, cost-of-living crises … impact price stability, they reduce living standards and they worsen inequality.” The ellipsis is part of Reuters’ published rendering.
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What the findings mean for household finances
The study’s reported results point to a wider consequence of food and energy shocks: the strain may continue through expectations, while poorer households can be hit harder because necessities occupy more of their budgets. Policy responses also involve trade-offs between reaching vulnerable people, preserving price signals, and fiscal cost.
For individual households, the findings do not predict a specific future inflation rate or provide a personal budgeting forecast. They describe reported aggregate research and policy comparisons, not advice about which costs any one household should prioritize or how a particular government will respond.
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