IMF Warns of Enduring Inflationary Pressures Amid Slowing Global Growth

The International Monetary Fund (IMF) has issued a significant warning in its latest global economic outlook, indicating that inflationary pressures are expected to persist longer than previously anticipated. This updated assessment, released in November 2025, attributes the sustained inflation primarily to ongoing supply chain disruptions and escalating geopolitical tensions worldwide, as reported by the IMF itself.

According to the IMF's October 2025 World Economic Outlook, global economic growth is projected to decelerate, moving from 3.3% in 2024 to 3.2% in 2025, and further to 3.1% in 2026. This represents a continued slowdown over five consecutive years following the post-pandemic rebound, as noted by Economic and Political Weekly in November 2025.

In light of these persistent challenges, the IMF is urging central banks globally to maintain a cautious and vigilant stance on monetary policy. This recommendation underscores the complexity of balancing inflation control with supporting economic activity in an environment marked by uncertainty and divergent economic paths, according to the IMF's analysis.

Geopolitical instability, including conflicts in Eastern Europe and the Middle East, along with the US-China trade rivalry, are major contributors to this economic uncertainty. These tensions are not only disrupting energy and food security but also impacting financial markets and global supply chains, as highlighted by S&P Global in its "Top Geopolitical Risks of 2025" report.

Supply chain disruptions, exacerbated by climate change, trade policy volatility, and labor shortages, are further fueling inflationary pressures and increasing operational costs for businesses. Swiss Re estimates that these global supply chain instabilities now cost businesses an annual $184 billion, driven by raw material volatility and logistics expenses.

The IMF's October 2025 report, titled "Global Economy in Flux, Prospects Remain Dim," underscores that while the near-term forecast saw a modest upward revision, global growth remains subdued. The report emphasizes that fiscal vulnerabilities and potential financial market corrections continue to pose significant risks to stability, as detailed by the IMF.

This challenging economic landscape demands careful navigation from policymakers to restore confidence and ensure sustainable growth, according to the IMF's latest assessment. The interplay of these factors creates a complex environment where traditional economic models face new and evolving pressures, as discussed in the World Economic Outlook.

• Persistent Inflationary Drivers: The IMF's latest reports consistently point to a combination of factors sustaining elevated inflation. Beyond supply chain issues and geopolitical tensions, strong domestic demand, particularly in some regions, housing costs, and energy price volatility are significant contributors. For instance, in the US, inflation hovered around 2.8-3.0% in late 2025, remaining above the Federal Reserve's 2% target, with housing and services inflation being particularly stubborn, according to Rule #1 Investing in May 2025 and NerdWallet in October 2025. The Bank of Canada also noted in January 2024 that underlying inflationary pressures were proving persistent, with inflation expected to return to target in 2025.

• Global Growth Deceleration and Divergence: The projected slowdown in global growth from 3.3% in 2024 to 3.1% in 2026 marks a significant trend of moderating expansion. This deceleration is not uniform, with advanced economies and emerging markets experiencing divergent paths, as highlighted by Economic and Political Weekly in November 2025. The IMF's October 2025 World Economic Outlook indicates that while the US growth outlook improved slightly for 2025, China's growth outlook weakened, and many emerging economies face downgrades due to trade barriers and geopolitical uncertainties.

• Geopolitical Tensions and Trade Fragmentation: Geopolitical risks are profoundly impacting the global economy, influencing growth, inflation, and supply chains. S&P Global's 2025 outlook identifies the Russia-Ukraine war, the Israel-Hamas conflict, and US-China relations as key sources of instability, fueling regional conflicts and affecting energy and food security. The Red Sea crisis, driven by Houthi attacks, continues to force lengthy shipping detours, drastically increasing transit times and costs, according to chroniclejournal.com in November 2025. These tensions contribute to a trend of trade fragmentation and protectionism, with the UN reporting in May 2025 that tariffs threaten to disrupt global supply chains and amplify financial turbulence.

• Supply Chain Vulnerabilities: Global supply chains remain highly vulnerable to disruptions, which are now considered a structural challenge rather than sporadic events. A report from April 2025 by Swiss Re and McKinsey research indicates that climate change, trade policy volatility, and labor shortages are exposing critical stress points. These disruptions lead to increased costs, delays, and unpredictable access to raw materials, eroding profit margins and contributing to inflation, as noted by Chroniclejournal.com. The World Economic Forum in June 2025 emphasized that resilience must now include ESG accountability due to rising reputational risks and regulatory scrutiny.

• Central Bank Policy Challenges: Central banks face the difficult task of navigating persistent inflation while supporting economic growth. The IMF's call for a cautious monetary policy stance reflects the risk that renewed inflationary pressures could interrupt the monetary policy pivot, impacting fiscal sustainability and financial stability. The European Central Bank, for example, is balancing inflation control with economic recovery, while the Bank of England has been gradually cutting rates after substantial disinflation, but remains focused on persistent inflationary pressures, as reported in November and August 2025 respectively.

• Impact on Different Economies: The economic outlook varies significantly across regions. While some advanced economies like the US have seen slight upgrades in growth forecasts for 2025, emerging markets and developing economies (EMDEs) are particularly vulnerable. The un reported in May 2025 that EMDEs face challenges from declining export revenues, tightening financial conditions, and reduced development assistance. Low-income countries are especially hard-hit by the current external environment, according to the IMF's August 2025 Annual Report, requiring continued financial support and debt restructuring efforts.

• Fiscal Sustainability and Debt Concerns: The global economy continues to grapple with a low-growth/high-debt outlook. Public debt exceeded $100 trillion in 2024 and is projected to approach 100% of global GDP by the end of the decade, according to the IMF's August 2025 Annual Report. This situation is compounded by fiscal vulnerabilities and the need for governments to rebuild buffers, as emphasized by the IMF in its October 2025 World Economic Outlook. The IMF mission chief to Kazakhstan, Ali Al-Eyd, stressed in November 2025 that tighter monetary policy must be matched by stricter fiscal discipline to cool demand.