International Monetary Fund on Tuesday has projected global growth at 3.0 per cent in 2025 and 3.1 per cent in 2026, as significant policy shifts continue to unfold worldwide. This projection is contained in the IMF’s latest World Economic Outlook (WEO) Update for July 2025, titled “Global Economy: Tenuous Resilience amid Persistent Uncertainty,” released on Tuesday. The forecast for 2025 is 0.2 percentage points higher than that in the reference forecast of the April 2025 WEO and 0.1 percentage points higher for 2026. The report said for sub-Saharan Africa, growth was expected to remain stable at 4.0 in 2025, as predicted in the April forecast, before increasing to 4.3 per cent in 2026. For Nigeria, growth is projected at 3.4 per cent in 2025 and 3.2 per cent in 2026. In the Middle East and Central Asia, growth was projected to increase to 3.4 per cent in 2025 and 3.5 per cent in 2026, while for Latin America and the Caribbean, growth was projected to slow to 2.2 per cent in 2025 and recover to 2.4 per cent in 2026.
According to the IMF, this reflects stronger-than-expected front-loading due to anticipated higher tariffs and lower average effective U.S. tariff rates compared to those announced in April. The projection also reflected an improvement in financial conditions, partly because of a weaker U.S. dollar and fiscal expansion in several major jurisdictions. It said global headline inflation was projected to decrease to 4.2 per cent in 2025 and 3.6 per cent in 2026, following a path similar to the forecasts projected in April. However, the overall outlook hides significant differences among countries, with forecasts predicting that inflation will remain above target levels in the United States, while it is expected to be more subdued in other large economies. The report said among advanced economies, growth was projected to be 1.5 per cent in 2025 and 1.6 per cent in 2026, like in the U.S., projected growth was expected to rise to 1.9 per cent in 2025 and 2.0 per cent in 2026. This is a pace that is 0.1 percentage point higher relative to the projection in the April 2025 reference forecast, with some offset from private sector demand cooling faster than expected and weaker immigration.
It said in the Euro area, growth was expected to increase to 1.0 per cent in 2025 and 1.2 per cent in 2026, while in other advanced economies, growth was projected to decrease to 1.6 per cent in 2025 and pick up to 2.1 per cent in 2026. For emerging markets and developing economies, growth was expected to increase to 4.1 per cent in 2025 and slightly drop to 4.0 per cent in 2026. It noted, “Compared to the forecast in April 2025, China’s growth is reversed upwards by 0.8 percentage points to 4.8 per cent due to stronger-than-expected activity in the first half of 2025 and a significant reduction in U.S.-China tariffs.”
It warned that any loss of central bank independence could undermine efforts to keep inflation expectations in check, potentially triggering a wave of financial, monetary and macroeconomic instability. The IMF hammered home that message in an update to its World Economic Outlook, released Tuesday, and in a separate interview with IMF chief economist Pierre-Olivier Gourinchas. In the update, the IMF said the current economic climate of prolonged trade tensions and uncertainty over evolving tariffs heightened the need for robust policies to safeguard financial stability and ensure central bank independence. In some cases, if tariff shocks resulted in disruptive movements in foreign exchange and risk premiums, it said it might be suitable for countries to implement temporary foreign exchange interventions or capital flow management measures. “Crucially, the ambiguous and volatile landscape also requires clear and consistent messaging from central banks and the protection of central bank independence, not only in legal terms, but also in practice,” the global lender said.
U.S. President Donald Trump has repeatedly exhorted the U.S. Federal Reserve to cut interest rates while questioning the leadership and continued tenure of Chair Jerome Powell, whose term at the Fed’s helm is due to end in May 2026. Those statements have unsettled markets, worried about a loss of the longstanding principle of Fed independence. The two men sparred over cost overruns on a Fed renovation project on Friday, as Trump repeated his call for lower rates. Asked about Trump’s efforts to push Powell out of office, Gourinchas underscored the importance of maintaining central bank independence to keep inflation expectations anchored. “This is really a core plank for macroeconomic stability overall. That’s one of the hard learned lessons of the last 40 years,” the IMF chief economist told Reuters in an interview, without mentioning the Fed specifically. We have a very, very clear message on this – it’s very important to keep central bank independence and to implement it,” he said. Central bank independence was foundational to macroeconomic frameworks in both advanced and emerging economies, he said. Despite the recent era of large price increases from 2021 to 2024, markets and consumers maintained confidence in policymakers’ determination to keep inflation in check over the medium term, averting a broad de-anchoring of inflation expectations.
“They think that someone is at the helm, someone is in the driving seat and is going to implement monetary policy to achieve price stability,” he said. “That’s the credibility.” Should that credibility become called into question or threatened, the link from inflation to inflation expectations would become “much more brittle,” he said.
Inflation could rise again suddenly due to myriad shocks, and if people did not trust central banks to do their jobs, inflation expectations would start rising, triggering wage increases, which would beget higher prices, higher interest rates and ultimately a need to “crash the economy.” “So now you have macroeconomic instability. You have monetary instability and you have financial instability,” he said, underscoring the need to ensure consumers and financial markets were certain that central banks would act on their own.
