Global Outlook

Download the PDF

Growth & Inflation

Both the US & global economy remained surprisingly resilient in 2025
However, the Middle East war has cast a cloud over the economic outlook in 2026
The energy price shock will lead to significantly higher inflation in coming months, but the ultimate economic fallout will depend on the intensity and duration of the war
Our base-case view is that an enduring ceasefire will be reached in Q2 allowing oil trade to resume through the Strait of Hormuz, inflation expectations will remain well-anchored and energy prices will ease over H2 2026
Under this more benign scenario, inflationary pressures will recede over H2-26 & 2027 & the global economy will be able to avoid a recession
Global growth is forecast to slow from a 3.4% pace in 2025 to 2.9% in 2026, before recovering to a 3.2% rate in 2027
However, risks are skewed towards a more malign or malignant outturn should the energy shock intensify in coming months or inflation expectations start to become unanchored
Across regions, the US economy is expected to outperform with Europe/Asia and non-oil exporting emerging markets most exposed to the energy shock

Monetary policymakers in advanced economies will attempt to look through the inflation impact of the energy supply shock provided inflation expectations remain well anchored & second-round impacts are limited
However, central banks with policy settings in accommodative territory (i.e. Japan) or neutral territory (i.e. Euro area) are likely to move to hike rates in 2026, while most other major central banks are expected to remain more cautious
QIC expects the US Federal Reserve will delay easing policy until it becomes clear that energy prices are moderating, but we still expect 25bps of cuts by the end of 2026 to help stabilize the unemployment rate
The ECB is forecast to hike rates by 50bps in 2026 to 2.50% and the BOJ is also expected to hike rates by 50bps
In a close call, we expect the BOE to keep rates unchanged at 3.75% in 2026. However, any signs of a pick-up in core inflation in coming months would likely force the BOE to shift towards modest rate hikes.

Download the PDF