Take two: World Bank cuts global growth outlook; US inflation rises less than expected
- 16 June 2025 (3 min read)
What do you need to know?
The World Bank cut its global growth forecast, cautioning that increased trade barriers and heightened uncertainty pose a "significant headwind". It now expects global GDP to grow by 2.3% in 2025 and 2.4% in 2026, down 0.4 and 0.3 percentage points respectively from its January estimates. This would mark the slowest rate of growth since 2008, aside from outright global recessions, while this decade is expected to see the slowest pace of expansion since the 1960s. The World Bank called for multilateral policy efforts to ease trade tensions to boost growth. AXA IM forecasts global growth of 2.6% and 2.4% for 2025 and 2026 respectively.
Around the world
US annual inflation rose to 2.4% in May, up from April’s 2.3% - a four-year low - on the back of higher housing and food prices. The increase was less than the 2.5% rise the market was expecting, suggesting the impact of the US’s trade tariffs has been so far relatively muted. Core inflation, excluding food and energy, remained unchanged at 2.8%, though the 0.1% monthly increase was 20 basis points below expectations. Elsewhere, China consumer prices fell -0.1% in May, unchanged from April, and marking the fourth consecutive month of deflation – though slightly above market expectations of -0.2%. Core inflation, excluding food and energy, rose to 0.6% from 0.5% previously.
Figure in focus: -0.2%
Japan’s economy contracted less than initially estimated in the first quarter (Q1). GDP shrank at an annualised pace of -0.2%, rather than -0.7%, after consumption data was revised upwards and capital expenditure revised down. In Q4 2024, it expanded by 2.2%. Markets expect the Bank of Japan (BoJ) to delay further interest rate hikes amid the weak economic backdrop and uncertainty over the impact of US tariff increases. Elsewhere, UK GDP contracted by -0.3% on a monthly basis in April, down from 0.2% growth in March. However, the UK’s blue-chip FTSE 100 index hit a fresh high.
Words of wisdom
Ocean acidification: When carbon dioxide is absorbed by the ocean, it reacts with water molecules leading to a fall in the pH level of the seawater. This damages coral reefs and other ocean habitats and can harm marine life. A new scientific study warned that ocean acidification has already reached critical levels, meaning that seven of the nine so-called planetary boundaries – limits within which humanity and the planet can thrive – have now been crossed. The report came alongside the 2025 United Nations Ocean Conference which issued a fresh call to accelerate measures to conserve and sustainably use the ocean.
What's coming up?
Central banks are in focus this week as the BoJ meets on Tuesday to decide on interest rates - it kept its benchmark rate unchanged at 0.5% in May, its highest level since 2008. The US Federal Reserve holds its own monetary policy meeting on Wednesday - officials left borrowing costs on hold at 4.25%-4.50% at their latest meeting – while the Bank of England convenes to set rates on Thursday. Economic data released this week includes UK and Eurozone inflation on Wednesday, followed by Japan's inflation figures on Friday.
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