A Federal Reserve Bank of San Francisco Economic Letter dated Nov. 2 said the current El Nino episode may have already raised U.S. consumer prices a little and points to a meaningful risk of higher inflation in 2027 if a La Nina follows, the authors wrote¹.

Molly Ardren, Tobin Graf and Brigitte Roth Tran based the letter on historical economic data and NOAA's Relative Oceanic Nino Index, scaling past El Nino effects to the size of the current episode, which they described as very strong¹.

Their estimates suggest El Nino added about 0.3 percentage point to the personal consumption expenditures price level between April and July 2026, with that increase expected to fade by the end of 2026, driven historically by core services, energy and food¹.

If a La Nina follows in 2027, a common pattern after strong El Nino events, the same method implies about a 1 percentage point net increase in PCE prices over 2027, again mainly from core services and food¹.

The authors said that without a La Nina in 2027 the model expects no further net price effects that year, and they are not forecasting NOAA's index, so they treat the finding as risk rather than a baseline forecast¹.

On jobs, they said past El Nino episodes left total nonfarm payrolls little changed in the first year and then higher in the following year, with or without a subsequent La Nina¹.

They listed limits: 22 El Nino events since the 1950s and only four very strong ones; the current episode is projected to be stronger than any in that sample; effects may not scale linearly; weather and La Nina forecasts are uncertain; and today's economy differs from earlier episodes¹.

The letter states that opinions are those of the authors and do not necessarily reflect the San Francisco Fed or the Federal Reserve Board¹. Reuters reported the letter on Nov. 2; the full Reuters article could not be read².