Geopolitical tensions remain elevated
Global growth is subdued but stable, with central banks cautiously cutting rates. Trade and sectoral tariffs, fiscal vulnerabilities, and political risks keep uncertainty elevated into 2026.
Ongoing pressures keep global growth subdued
The global macro forecasts are almost unchanged since the June update, with global growth a tenth higher at 2.8% this year and the 2026 projection unchanged at 2.9%. Numerically, this reflects a minor upgrade in the US; fundamentally, it reflects the fact that trade-related disruptions in economic activity have so far been largely manageable as has been the inflationary impact of tariffs.
Key developed market central banks have or are proceeding with careful rate cuts. On this front, nearly everything we said in June stands: “[…] we remain optimistic about the medium-term outlook. We see growth improving in 2026, both in the US and in Europe as more supportive policies take hold and the uncertainty cloud thins. We hold to our call for 75 bp worth of Fed cuts this year. The ECB has delivered the 100 bp worth of cuts we had projected, and we don’t think they need to do more. The BoJ is hand-tied and may sit pat for the rest of the year, and the BoE remains behind the curve and should hasten the rate cuts. China continues to focus on managing dual domestic and external risks.” The BoE remains the one puzzling laggard in the easing cycle, even as the RBA has recently followed through on our long-held call for easing.
Uncertainties and vulnerabilities persist across the board, in trade, fiscal, and geopolitical spheres. While the moment of acute risk on trade has passed, uncertainty will continue for some time (see next section for a more detailed analysis). This is the main reason behind this year’s slowdown in global growth. Still, with the less favorable tariff profile locked in as a basis of comparison, the incremental impact moderates over time. Fiscal uncertainties and vulnerabilities persist, with recurrent concerns coming to the fore around the globe. (Geo)Political issues present persistent risks. No easy answers, just acute vigilance, required all around.
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There's more to this quarterly edition in PDF. Take a look at our World Output and Inflation table – a short and sweet summary of our growth and inflation forecasts for the year and beyond.