IMF Raises 2026 Global Growth Forecast to 3.1% but Warns Economy Nearing Limits of Resilience

The International Monetary Fund lifted its 2026 global growth forecast by 0.1 percentage point to 3.1% in its October World Economic Outlook, citing AI investment as a partial offset to energy-price shocks, while leaving its 2027 projection unchanged at 3.4%. The Fund described the global outlook as "bifurcated," warning that energy-importing nations face the most difficult conditions and that margins of adjustment are narrowing amid geopolitical and technological strains. Policymakers were urged to contain inflation and debt while managing the transition to new technologies.

Country-level revisions were uneven. Advanced economies as a group were upgraded sharply, with the 2026 forecast rising 0.4 points to 2.1%, though 2027 was unchanged at 1.6%. The euro area was lifted 0.2 points to 1.1% for 2026, Germany gained 0.6 points to 1.3%, and the UK was revised up 0.2 points to 1.3%. The US was held steady at 2.3% for both years, while Japan remained at 0.7%. India was upgraded 0.6 points to 7.0% for 2026, whereas China was trimmed 0.1 points to 4.5%. Latin America and the Caribbean were cut 0.2 points to 2.3% for 2026 and 0.2 points to 2.5% for 2027, with Brazil's 2026 forecast cut to 2.2% and Argentina's trimmed sharply to 2.1%.

The Reserve Bank of Australia's September meeting minutes showed unanimous support for a 25-basis-point rate increase, with all board members agreeing that excess demand was greater than previously assumed and that the risk of persistently elevated inflation had grown. The RBA noted that some inflationary upside risks had already materialised since August, that the Middle East conflict had pushed oil prices well above assumed levels, and that AI-related tech price pressures were emerging in Australia alongside broad-based domestic cost increases. The board briefly weighed holding rates steady, pointing to house prices that had fallen more than expected, but concluded that acting promptly was essential to keep inflation expectations anchored.

Japan's producer price index rose 6.8% year on year in September, below both the 7.6% consensus estimate and the prior month's 7.6% reading, and fell 0.3% month on month against an expected 0.5% gain. Despite the miss, analysts noted that wholesale inflation remained elevated enough to keep alive expectations for further Bank of Japan rate hikes. Bank lending including trusts rose 5.3% year on year, slightly below the prior 5.4%.

In the UK, BRC like-for-like retail sales rose 1.0% year on year in September, beating the 0.7% estimate and accelerating from 0.5% in August. Barclays consumer spending came in at 2.0% year on year, a slight easing from 2.1% previously.

Across markets, spot gold fell roughly 0.7% to around $4,167 per ounce as a firm dollar and rising oil prices stoked inflation and rate-hike concerns ahead of Wednesday's US CPI report. Brent crude climbed to a two-week high near $105.80 per barrel amid renewed Russia-Ukraine tensions and fresh Houthi attacks in Saudi Arabia. Bitcoin dropped about 1.9% to $81,373. The 10-year US Treasury yield eased to 5.22%, and S&P 500 third-quarter earnings are expected to rise 25% year over year.