Growth

Uncertainty around the global economic outlook remains high as US trade policy continues to vacillate.
The US has extended the pause on higher tariff rates from 9 July to 1 August. However, concrete trade deals are yet to emerge and the US’ revised tariff threats would see a significant jump in its effective tariff rate. Sectoral tariff threats/announcements have continued, with new copper tariffs to begin 1 August.
Higher tariffs and increased policy uncertainty are expected to cause the US economy to slow sharply over 2025 and there remains a very high possibility (~45%) that the US could fall into recession unless the US achieves meaningful progress in trade deals with its major partners.
China’s economy has held up well over H1 2025, with increased policy stimulus from Chinese authorities helping to limit the damage from the trade war, although growth is expected to slow in H2 2025 and 2026.
Global growth is expected to slow, from modest growth of 3.3% in 2024 to a below trend 2½-3% in 2025 & 2026.

Inflation

Tariff hikes will still place upward pressure on US inflation in 2025 (to between 3-4%), although these pressures should gradually dissipate over the course of 2026.
Outside the US, QIC expects core inflation in most major economies to fall close to central bank targets by 2026.

The US Federal Reserve (Fed) faces a difficult trade-off between weakening growth and rising inflation.
Provided long-run inflation expectations remain well anchored, we expect the Fed will cut rates by 50bps in H2 2025 to prevent a more significant deterioration in the economy, with a further 50bps of cuts expected in 2026.
QIC expects further easing from the European Central Bank and Bank of England over the coming quarters. In contrast the Bank of Japan is expected to very gradually lift rates going forward.