The International Monetary Fund (IMF) announced in its updated report on the world economy perspectives on Tuesday that cut the global growth projections to 2.8% in 2025 and 3% in 2026 from 3.3% for both years in the previous forecast, citing US tariffs at historical levels.
Key aspects
“The rapid escalation of commercial tensions and high uncertainty is expected to have a significant impact on growth in all regions.”
“The risks to the global economy have increased and the worsening of commercial tensions could further depress growth.”
“The financial conditions could harden as the markets react to the lowest growth prospects, markets could face more severe evidence.”
“Global inflation is expected to reach 4.3% in 2025 and 3.6% in 2026, with remarkable upward reviews for advanced economies.”
“The downward risks intensifying the global perspective, a commercial war in climbing could reduce the growth in the short and long term.”
“Changes in politics and the deterioration of feeling could trigger a new revaluation of assets, sudden adjustments in currency change rates.”
“Broader financial instability could occur, including damage to the international monetary system.”
“It is projected that US growth slows down to 1.8% in 2025, a decrease of 0.9 percentage points compared to January forecast, due to political uncertainty and commercial tensions.”
“The IMF sees Mexico’s economy among the most affected and forecasts that will contract 0.3% in 2025, compared to the growth forecast of 1.4% in January.”
“The US faces a significant increase in a percentage point in general inflation, not everything due to tariffs.”
“The Federal Reserve will have to be very attentive to the expectations of disagreeing inflation, impact on salaries.”
“Independence is a key component of the credibility of central banks in the fight against inflation.”
“No recession is expected for USA but the risk of recession has increased to almost 40%.”
“The depreciation of the US dollar has been ordered, no dislocation is observed in currency markets.”
“Restoring the predictability of the global commercial system is absolutely critical to strengthen growth.”
Market reaction
The American dollar index did not show the IMF report and was last gaining 0.3% in the day at 98.60.
US dollar FAQS
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values that overcome in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
