July 2025: International economic outlook

Summary

Forecast changes

• We made minimal changes to our global growth forecast this month, and still see global GDP growth slowing to 2.7% in 2025. We also continue to see a further global growth slowdown to 2.5% in 2026. The only change of note is a slightly firmer outlook for the Chinese economy, with our GDP forecast slightly higher, given the economy's momentum and U.S. trade truce.

• Modest revisions to our global growth outlook have also translated to only modest changes in our central bank monetary policy outlooks. We now see a slightly more gradual pace of monetary easing in Canada, and also expect just one additional rate cut in Mexico. On the flip side, we expect modestly faster or more pronounced easing from central banks in Norway and Australia. While we still see a final rate hike from Japan in October for now, there is a risk that rate hike is delayed until early next year.

• Our view of modest U.S. dollar depreciation in 2025 and modest U.S. dollar appreciation in 2026 is unchanged. Subdued U.S. growth and Fed rate cuts should continue to weigh on the greenback over the next several months. However, we continue to believe the dollar can reverse course and strengthen in 2026 as monetary policy and growth trends favor the United States. The U.S. dollar remaining the world's reserve currency should also boost the greenback in 2026.

Key themes

• Global economic trends have shown remarkable resilience during the first half of 2025. With that said, we still believe a global growth slowdown can materialize in H2-2025. Tariff uncertainties have resurfaced to some extent, and new signs that higher tariffs are starting to weigh more noticeably on economic activity are becoming apparent. We expect the global economy to grow below average this year and for a slowdown in global activity to persist next year.

• Even as signs of slower growth emerge, there are signs of lingering inflation pressures across many major economies and, in some cases, incipient tariff-related price pressures. We think inflation pressures could limit the room to maneuver for major central banks. A gradual pace of rate cuts should continue, and in select cases, G10 central banks are already at or nearing the end of their monetary easing cycles.

• Our outlook for the U.S. dollar continues to be driven by a combination of traditional macro influences, monetary policy trends and views toward the U.S. dollar as the world's reserve currency. A U.S. growth slowdown and Fed easing should keep the greenback under pressure through much of 2025. Still, with no clear or decisive evidence as yet that investors are moving away from the U.S. dollar as the world's reserve currency, we think a stronger cyclical performance of the U.S. economy in 2026 should allow for a stronger U.S. currency next year.

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