2025 Global Economy: Direction Right, Timing Off – IIF Year-End Review

In its year-end Global Macro Views report, the Institute of International Finance (IIF) reflects on 2025 as a period where macroeconomic directions aligned with expectations, but uneven timing and sequencing demanded ongoing recalibrations amid structural shifts.

The US saw delayed disinflation, with core services inflation persisting longer due to resilient labor incomes and strategic pricing, while growth slowed later than anticipated, buoyed by durable consumer spending and AI-driven investments. China exemplified narrative volatility: repeated recovery rallies fizzled against low-multiplier adjustments and structural constraints, exacerbated by tariff headlines around “Liberation Day” in April, leading to subdued capital inflows.

Global Economy

Emerging markets demonstrated unexpected resilience, anchored more in domestic reforms and policy credibility than external factors, with growth rotating toward India and Asia ex-China. Europe and Japan progressed gradually, with firmer-than-expected activity in services offsetting manufacturing weakness.

Despite heightened geopolitical tensions—including US tariff escalations—the dollar remained range-bound, volatility stayed low, and markets absorbed shocks orderly. The IIF emphasizes that structural regimes (tariffs, AI adoption, EM differentiation) defined boundaries, while cyclical signals required agile interpretation of prices, activity, and expectations.

Looking to 2026, the report stresses disciplined monitoring of these interactions for navigating an evolving landscape. (248 words)

Business News