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The International Monetary Fund today delivered an unexpectedly brighter economic forecast, revising its global growth projections upward for 2025 and 2026. In its latest World Economic Outlook report, titled “Global Economy: Tenuous Resilience amid Persistent Uncertainty,” the fund cited a “fragile easing” of trade tensions as a key driver, yet warned that the global economy’s newfound momentum remains vulnerable to a host of geopolitical and policy risks.

The IMF now projects the world economy will expand by 3.0% in 2025, a notable increase from its April forecast of 2.8%. The outlook for 2026 was also upgraded to 3.1%, up from the previous 3.0%. The upward revisions were largely attributed to a series of shifts in global trade policy, specifically a de-escalation of certain tariff threats and the strategic front-loading of trade by businesses seeking to circumvent potential new duties.

Pierre-Olivier Gourinchas, the IMF’s chief economist, characterized the current moment as one of cautious optimism. “The global economy has continued to hold steady,” Gourinchas stated, “but the composition of activity points to distortions from tariffs, rather than underlying robustness.” The report highlights that a modest decline in trade tensions, while “fragile,” has contributed to the resilience of the global economy. This has allowed for a temporary boost in activity as companies rushed to move goods ahead of anticipated trade barriers.

The report also noted that a number of major economies are benefiting from this improved outlook. The United States, in particular, saw its 2025 growth forecast revised upward, reflecting a combination of the tariff truce and the impact of domestic fiscal expansion. Similarly, the Eurozone saw a modest increase in its forecast, with some countries, like Ireland, experiencing a boost from pharmaceutical exports aimed at avoiding new US duties. However, the report also pointed to downward revisions in other regions, including a notable downgrade for Russia and some emerging market economies.

Despite the rosier short-term picture, the IMF’s analysis is tempered with significant caution. The report’s title, “Tenuous Resilience,” underscores the fundamental risks that could easily derail the current trajectory. The primary threats include the potential for renewed protectionism, elevated uncertainty over trade policy, and ongoing geopolitical tensions. The fund warned that if the fragile easing of trade talks were to unravel, global output could suffer.

The IMF’s advice to policymakers remains centered on restoring confidence and predictability. It urges governments to address fiscal vulnerabilities, rebuild financial buffers, and implement structural reforms to support long-term growth. Central banks, the report noted, must maintain their independence to ensure price and financial stability. The report concludes that while the global economy has shown surprising resilience, it is operating in a precarious environment where policy missteps could have swift and severe consequences.

In a challenging turn for global monetary policy, central banks are grappling with a persistent and stubbornly high core inflation rate, threatening to derail a widely anticipated cycle of interest rate cuts. Recent data from major economies, including the United Kingdom and the United States, reveals that while overall, or “headline,” inflation has been trending downward, the underlying price pressures are proving far more resilient than policymakers had hoped. This presents a complex dilemma: whether to continue easing monetary policy to support slowing economies or to hold firm to prevent inflation from becoming entrenched.

A prime example is the Bank of England, which just this month cut its policy rate to 4% despite consumer price inflation rising to 3.8% in July, well above its 2% target. The bank’s Monetary Policy Committee was reportedly split on the decision, highlighting the internal conflict central bankers face. A significant factor in this persistence is core inflation, which strips out volatile components like food and energy prices to provide a clearer picture of underlying price trends. Core inflation is often seen as a better indicator of future inflation because it reflects domestic demand pressures, wage growth, and service prices—factors that are less susceptible to short-term global shocks.

The concern for central banks is that persistent core inflation could lead to a wage-price spiral, where higher prices lead to demands for higher wages, which in turn push prices even higher. This kind of self-reinforcing dynamic could make it incredibly difficult to bring inflation back down to target levels without a more severe economic slowdown. As a result, even as some central banks have begun to ease their restrictive stance, they remain cautious. For instance, the European Central Bank paused its rate-cutting campaign in late July, citing a strengthening eurozone economy.

The policy conundrum is compounded by a global environment of slowing economic growth and evolving geopolitical risks. Policymakers must now balance the need to curb inflation against the risk of stifling economic activity and pushing their countries into a deeper recession. The recent rise in long-term interest rates, which has occurred despite central bank easing, further complicates the picture, as it reflects market concerns over future inflation and fiscal sustainability.

For consumers and businesses, this means the relief from high borrowing costs may be slower and bumpier than expected. Financial markets, too, are adjusting to the new reality, with investors scaling back expectations for aggressive rate cuts. As central banks prepare for their upcoming policy meetings, all eyes will be on their communications. The language they use to justify their decisions—whether they lean on the need for continued vigilance against inflation or on the risks to growth—will provide critical clues about how they intend to navigate this precarious path.

Sweden tools up against the US and Asia with its own Gigafactory

Just south of the arctic circle is not where you’d expect to find a battery factory as large as 71 football fields. Lying 125 miles south of the arctic circle and surrounded by forests of looming pine trees, the gigafactory looks decidedly out of place.

The term Gigafactory was coined by Elon Musk to describe his first high-output battery facility in the Nevada desert.

The Swedish factory is being developed by Northvolt, a startup venture co-founded by two former Tesla executives. This is about as far removed from the searing heat of the Nevada desert as you can get.

However, it is from this factory and a base in Västerås, on the outskirts of Stockholm, that Northvolt is intending to supply 25% of Europe’s electric batteries. The intention is to capitalize on the switch from carbon fuel-powered vehicles to electric vehicles. Swedish car giant Volvo has already announced its plan to produce only electric vehicles from 2030.

Northvolt recently announced that it had raised a further $2.75 billion in funding to pay for the expansion.

Preparing for the battery boom

According to the investment bank UBS, 40% of all new car sales will be electric vehicles by 2030, and by 2040 the figure will be almost 100%.

The plant’s manager, Fredrik Hedlund, said recently – “If you look at the agenda for all the automotive manufacturers to actually make those electric cars, the amount of cells that you’ll need to access, is going to be humongous.”

Mr. Hedlund is also confident that despite a huge amount of work still to be done, the factory will begin production by the end of the year. In its first phase, it will manufacture enough batteries for 300,000 cars annually, but it has the potential to ramp production up to produce enough batteries to power 1 million vehicles.

Northvolt has already secured a contract with german car giant Volkswagen to produce its batteries for the next decade. It is also planning to establish a long-term partnership with Swedish bus and truck manufacturer Scania.

Speaking to the BBC Mr. Hedlund said – “We are building a totally new industry that hasn’t really existed, especially in Europe, at this scale. I think, not only myself but a lot of people, think that this is the coolest project in Europe right now.”

Environmental concerns are driving the move to electrification and the Swedish gigafactory is utilizing hydroelectric energy from the nearby Skellefte River to ensure that its production techniques are as eco-friendly as the product.

The factory is at the forefront of a wider effort in Europe to cash in on the move to electric vehicles. The market is currently dominated by Asian companies and US-based Tesla. But now, Norwegian energy firm Freyr is planning its own Gigafactory, and German companies Daimler and BMZ already have factories up and running.

A French startup, Verkor, is planning a Gigafactory in Toulouse.

With Nothvolt’s presence giving the town of Västerås a feel akin to a “boom town” there is talk of the race to electrification being the new oil rush.

The Biden administration has announced a series of strict sanctions against Russia. These measures are designed to target the Russian economy and have been sanctioned as a punishment for Russia’s cyberespionage campaign and its alleged interference in the presidential election.

The White House said that the measures, which target 32 Russian officials and entities, are designed to deter “Russia’s harmful foreign activities.”

The sanctions were signed on Thursday by President Joe Biden.

According to a statement released by the White House, the sanctions are aimed at showing the US “will impose costs in a strategic and economically impactful manner on Russia if it continues its destabilizing international action.”

The White House has named the Russian foreign intelligence service, the SVR, as being behind the “Solar Winds” cyberattack that gave access to 18,000 government and private computer networks to cyber-criminals.

They are also in retaliation for Russia’s alleged meddling in both the 2016 and 2020 Presidential elections.

Financial Implications

These sanctions are designed to hurt Russia in the pocket. From 14th June U.S. financial institutions will be barred from purchasing government bonds directly from the Russian National Wealth Fund, Ministry of Finance, and the Russian Central Bank.

This action will complicate Moscow’s ability to raise capital in international capital markets, according to experts. As part of a new order signed by President Biden, the U.S. administration is also reserving the right to further broaden sovereign debt sanctions if Moscow persists with its “foreign interference.”

According to Edward Fishman of the Atlantic council – “This action signals that the Biden administration is not going to hold back. They’re taking significant actions against the Russian economy and putting global markets on notice that Russian sanctions will increase if Russia’s aggressive behavior continues.”

How much the Russian economy will be harmed by these sanctions remains to be seen. Sanctions imposed by President Obama in 2014 had hurt the country’s economy, but Moscow adapted by cutting public spending and decreasing its reliance on imports and relied on gas and oil exports to bring capital in.

Experts said that Donald Trump’s reluctance to impose sanctions on the country. meant that investors began to reenter the Russian market.

The latest Sovereign Debt sanctions affect both Ruble and non-ruble transactions and are designed to ensure that Russia is going to struggle to raise funds in the international debt market.

“Russia will know it is shut out for the future from the international debt market,” said Anders Aslund, a senior fellow at the Atlantic Council.

Moscow Responds

Russia’s foreign ministry has called the sanctions “hostile steps that dangerously raise the temperature of confrontation.”

A spokesman for the Kremlin, Dmitry Peskov said in a statement that Russia saw the sanctions as being illegal. He added that Moscow would retaliate in kind.

The U.S. Ambassador in Moscow, John Sullivan, was summoned to the foreign ministry. According to a foreign ministry spokeswoman, for what would be a difficult walk.

The Federal Reserve recently raised interest rates for the second time this year, increasing the federal funds rate by a quarter point to a range of 2 to 2.25%. While this modest increase is intended to keep inflation low and stable, higher interest rates can have significant effects on consumers and the broader economy.

For individuals, higher interest rates mean that borrowing money becomes more expensive. When interest rates rise, the costs of mortgages, auto loans, credit cards, and other loans also increase. For someone taking out a new mortgage or car loan, a higher interest rate could add tens or even hundreds of dollars to monthly payments, adding up to thousands of dollars over the life of the loan. Additional interest charges reduce how much of the payment goes toward principal and can delay payoff of the loan.

Higher interest rates also impact credit card spending. As rates rise, the annual percentage rate or APR on credit cards climbs as well. For consumers who routinely carry credit card balances, this means shelling out more each month to cover interest charges. The impacts may be small for modest balances, but sizable for those struggling with significant debt or only making minimum payments. High interest rates make it harder to pay down balances and can perpetuate ongoing debt.

At the broader economic level, increased interest rates can slow lending, especially for big-ticket purchases like homes or vehicles. When interest rates go up, borrowing money becomes more expensive. This can deter people from taking out loans or encourage saving more to pay in cash instead of financing purchases. Slower loan growth translates to fewer home and auto sales, with effects rippling across related industries. It also means less revenue for banks that earn money by charging interest on loans.

However, the impacts on consumers and the economy depend on the overall level of interest rates and how much they increase. Minor or moderate changes may have minimal impacts, especially if income levels are also rising. The Fed closely monitors inflation, employment, GDP growth, and other indicators to determine appropriate interest rate levels. While higher interest rates can restrain an overheating economy and keep inflation stable in the long run, significantly higher rates can also extinguish economic growth and make borrowing money a heavier burden for individuals and businesses. The effects of interest rate changes underscore the complexity of economic policymaking and the far-reaching consequences of the Fed’s decisions.

Robert Shiller, the Nobel Prize winning economist, has predicted that despite the current buoyancy of the housing market, prices will eventually drop. Speaking to Yahoo Finance Live, he said that – “They’ll come back down, not overnight, but enough to cause some pain.”

House prices have recently seen their sharpest rise in 15 years. The most recent S&P national home price index saw a 13.2% annual gain in March of this year. Last week the National Association of Realtors said that the average existing home price in the U.S. was $341,600, a rise of 19.1% over April 2020.

Shiller admits that there is no clear explanation as to why the housing market is booming. But he did add that he expects the market conditions to remain buoyant for the next year, or perhaps two. He said that the work from home revolution and low-interest rates would sustain the market in the short term.

Shiller said that – “This is not a market that collapses overnight. It’s less short-run volatile than the stock market. But you can see that we’re seeing price increases now that haven’t quite been realized since those years just before the financial crisis. I think it is some kind of irrational exuberance, people are having fun, and they will as long as prices keep going up.”

A market with “aspects of a bubble.”

In the interview, Shiller described the current housing market as having “aspects of a bubble to it.” He said that the rapid home price increases seen over the past year are reminiscent of those seen in the years leading up to the recession of 2008, which wiped out trillions of dollars from ordinary American family wealth.

He compared the current market to that of 2003 – “There is excitement and people are talking and some people are bidding way more than the asking price and that becomes a narrative or a story.”

He added that although there were similarities to 2003/2008, the current market differs from the mortgage crisis that caused the last crisis.

“It’s not the same as 2003, it could be stronger. I think we have better protections, we have better supervision of lenders. So I don’t know if we should be worried about 2007, 2008, 2009 happening again.”

He does find the current market conditions as “disquieting” though. He singled out Phoenix (Arizona) as an example. The Phoenix housing market has had the biggest increase over the past year with home prices rising by 20%.

Shiller is the co-founder of the CME Case Shiller home price index futures. This was established 15 years ago to allow people to hedge their risk during housing markets like the current one.

Speaking about the futures market, he compared the current mood of the nation as it recovers from the coronavirus epidemic as similar to that at the end of WW2 – “So our futures market is now predicting big increases over the next year or more but it’s not certain. It kind of reminds me of the spirit after World War 2 ended. There was a spending spree by people. They were jubilant the war was over.”

One of France’s major export businesses has been devastated by a severe frost that has affected over 80% of the country’s vineyards. French winemakers were already facing tough times in the wake of the global pandemic and from U.S. tariffs.

According to the European Committee of Wine Companies, the unusually late frost has affected all of the main wine-growing areas in the country. The trade body said this week that – “This is expected to cause a yield loss ranging from 25% to up to 50% in some regions.”

The scope of the destruction is huge and has affected areas that include Champagne, Bordeaux, Burgundy, Loire Valley, Provence, and the Rhone Valley.

The effects of the frost were exacerbated by unusually warm temperatures during the preceding weeks. This meant that vines had grown faster than usual and left them more sensitive to the effects of the cold. In the Champagne region, temperatures went from 80° F to 22° F in the space of a week.

Anne Colombo president of the Cornas Appellation, a wine-growing area in the Rhone Valley, said that the frost in Cornas was the worst the region had seen for half a century, she added that in some regions “there will be very, very few grapes this year.”

Christopher Chateau, Director of Communications for the Bordeaux Wine Council painted an equally bleak picture when speaking earlier this week – “An important share of the harvest has been lost. It’s too early to give a percentage estimate, but in any case, it’s a tragedy for the winegrowers who have been hit.”

In mostly futile attempts to protect their crops, Vineyard managers and their staff tried to keep the vines warm by using braziers and candles to keep the temperatures above freezing.

Other crops

It isn’t just the winemakers that have been hit by the severity of the late frost. Other crops including rapeseed and beets have been just as sorely affected. In a released statement the French National Federation of Farmers Unions said that the anguish is immense in the orchards, vineyards, and fields.

French Prime Minister Jean Castex said that the agricultural industry hadn’t faced such a crisis since 1991. Speaking to journalists Government Spokesperson Gabriel Attal said in some regions almost the entire annual production of certain crops would be lost.

The situation is so dire that it triggered the French Government’s “Agricultural Calamities Program.” This puts in place a series of financial support measures and tax relief programs to aid the industry. Government officials have also hosted a string of meetings with industry representatives, insurers, and bankers as they try to identify what other support measures will be required.

For the wine industry, the catastrophe comes at the worst possible time. The pandemic and U.S. tariffs related to a trade dispute had already devasted sales of the product.
In 2020, exports of French spirits and wines fell by 14% to $14.5 billion, with the U.S. market seeing a particularly sharp drop with sales tumbling 18%.

Shares of Peloton Interactive Inc. plummeted on Wednesday after the company announced it was voluntarily recalling 125,000 Tread and Tread+ treadmills. The recall comes in the wake of 70 reports of injuries to children, and one death being attributed to the machines.

On Wednesday, the company and the U.S. Consumer Product Safety Commission (CPSC) announced two separate recalls of Tread and Tread+ machines, following the death of one child and a host of other incidents. The company had previously resisted pressure to issue such a recall from the U.S. safety agency, a stance that Peloton CEO John Foley admits was a mistake. In a statement released by Mr. Foley, he said –

“I want to be clear, Peloton made a mistake in our initial response to the Consumer Product Safety Commission’s request that we recall the Tread+. We should have engaged more productively with them from the outset. For that, I apologize.”

He said that Peloton now intends to work closely with the CPSC to “set new industry safety standards for treadmills because the company has a desire and a responsibility to be an industry leader in product safety.”

Mr. Foley said yesterday that the voluntary decision to recall the devices after the child’s death, and other reports of injuries was the “right thing to do” for the sake of the company’s members and their families.

Amongst the reported injuries caused by the machines are bruising, cuts and abrasions, and broken bones. Last month, the company warned parents to keep children clear of the machine after a six-year-old was killed when he was pulled under the rear of the Tread+ machine.

Speaking at the time, Mr. Foley said the incident was a “tragic accident,” and one of a handful of incidents in which children had been injured by the firm’s exercise equipment.
The CPSC said that Peloton is voluntarily recalling both the Peloton Thread and the Thread+ models, the former due to a safety risk associated with its display falling off. The CPSC said they had reached an agreement with the firm, under which the company must stop selling its machines in the U.S. and offer full refunds to customers who want to return them.

Peloton is a company that cashed in on the pandemic. As gyms closed their doors due to restrictions, Peloton offered a service that allowed people to exercise at home with live video feeds from trainers. However, it quickly became apparent that both models of their exercise equipment were seriously flawed.

More serious are the dangers associated with the Tread+ models. According to the CPSC because – “Adult users, children, pets, and objects can be pulled underneath the rear of the treadmill, posing a risk of injury or death.”

Shares in the company fell by more than 14% after the recall was announced.

In a year when the news was dominated by the global pandemic, business scandals that would have normally made front-page headlines in the business press, slipped under the radar.

Now, with the situation easing, it is as good a time as any to remind ourselves of some of the juiciest scandals that didn’t get the attention they deserved.

1 Nikola and the hydrogen-powered truck that wasn’t

September was the month when it all started to go wrong for hydrogen-powered truck startup Nikola.

Hindenburg Research (ironically a name that has some history with hydrogen blowing up) was the company that put the cat amongst the pigeons.

Hindenburg Research reported that Nikola and its CEO, Trevor Milton, had made seriously flawed claims that misrepresented the company’s core technology. Perhaps the most brazen was the 2016 video that showed the hydrogen-powered truck in action. In actual fact, the truck was filmed rolling down a hill powered by nothing more exotic than gravity.

Nikola did admit to the deception, but claimed they had never said that the truck was hydrogen-powered, merely that it was in motion.

The timing of the Hindenburg Research article couldn’t have come at a worse time for Nikola, coming two days after the company had announced plans for a major partnership with General Motors.

The outcome – Trevor Milton resigned, General Motors pulled the plug on the deal, and shares slipped from a high of $79.73 to $17.

2 Twitter and the tweets that weren’t

In July of 2020, Twitter had to shut down all verified accounts as a series of famous accounts began tweeting a Bitcoin scam. Amongst the unwilling participants were names such as Elon Musk, Barack Obama, and Kim Kardashian.

Fearing a massive and highly sophisticated hack that was possibly state-sponsored, the company began to investigate. As it transpires, the action was nothing more than a teenager with too much time on his hands.

Floridian Graham Ivan Clark had fooled a Twitter employee over the phone into revealing all the credentials required to reset the passwords and log in to the accounts.

Twitter has since tightened up on the number of people with access to such information and has issued a comprehensive report on how the hack happened.

Graham Ivan Clark is currently awaiting trial.

3 Wirecard and the $2.1 billion that wasn’t

Wirecard has been called the Enron of Germany. It is now confined to history, but for a short while, it was Europe’s preeminent Fintech company and appeared as if it could do no wrong.

Former CEO Markus Braun plays a similar role to that of Enron’s late CEO Kenneth Lay. He took over the ailing company in 2002, immediately began to attract new capital and the company’s fortunes seemed to be on the rise.

However, behind the scenes a series of dodgy accounting practices that regulators and auditors failed to spot meant that Wirecard’s $27 billion valuation was based on business that didn’t exist.

The warning signs had always been there, but despite doubts raised by Financial Times reporter Dan McCrum, the authorities took no immediate action. Indeed, they initially launched an investigation, not against Wirecard, but of the Financial Times.

It couldn’t last, however. In June 2020 Wirecard announced that it was missing $2.1 billion. An announcement that pre-empted the resignation of Braun, and shortly afterward the company admitted that in all likelihood the money didn’t exist.

Braun was arrested and remains in custody awaiting trial. The company’s shares went from a high of €233 to €0.43.

4 McDonald’s and the CEO who isn’t (anymore)

This saga began not in 2020 but at the end of 2019 when CEO Steve Easterbrook was fired for “sexting” a colleague in what McDonald’s said was a consensual relationship.

This was thought to be the end of the matter with Mr. Easterbrook saying in an email to employees – “Given the values of the company, I agree with the board that it is time for me to move on.”

However, this was merely the start, as since Mr.Easterbrook’s departure McDonald’s has filed a lawsuit against him. The company alleges the ex-CEO had sexual relationships with three employees in the year before he was fired and approved stock grants worth hundreds of thousands to one of the women.

McDonald’s also claims that Mr. Easterbrook had hidden evidence during its initial investigation and that he should repay his severance in light of the new allegations. Mr. Easterbrook fired back saying that the company was always aware of the stock awards and relationships when the severance was negotiated.

America’s economy is creaking under the strain of the global pandemic. Joe Biden has vowed to fix this, starting by passing a $2 trillion stimulus bill.

It is hoped that this bill will go a long way to restarting the US economy. It is aimed at providing immediate relief to a struggling population, funding infrastructure improvements, and encouraging green jobs.

But will this be enough?

Joe Biden has recruited a team of experienced experts to help the country that has 10 million people unemployed and a pandemic that has killed over half a million citizens.

Meet the team

Brian Deese – National Economic Council.

The National Economic Council is tasked with coordinating and organizing the government’s economic policies. At 42 years of age, Brian Deese is the youngest-ever head of the NEC.
His track record includes working on the rescue of the Auto-industry in the wake of the 2007/8 financial crisis. Although some on the left have reservations about his close ties to Wall Street, others, including former president Barack Obama, think highly of him.

Janet Yellen – Treasury Secretary

Janet Yellen was dropped from her position at the Federal Reserve by Donald Trump, ostensibly because at only five feet tall she was too short for the job. Joe Biden has overlooked this shortcoming and appointed her to become the first female head of the Treasury Department in its 231-year history.

She is credited with helping to steer the US out of the 2008 recession and is seen as a steady and resourceful hand on the tiller of the treasury department.
Cecilia Rouse – Council of Economic Advisors

Another first, Cecilia Rouse is the first African American woman to head the Council of Economic Advisors. The Princeton Economist is the Dean of the university’s School of Public and International affairs.

She has previously worked for Bill Clinton, working on problems like long-term unemployment and racial equality as well as acting as an economic advisor to President Obama.

Neera Tanden – Office of Management and Budget

Neera Tanden is a Yale-trained lawyer who is the first Asian American to head the Office of Management and Budget. She has been tasked with the delicate and difficult job of turning policy into reality via the federal budget.

President Biden has said that Ms. Tanden’s single-parent, public-assistance, upbringing would give her valuable insights into her role of overseeing the Federal Government’s spending.

Known for not pulling her punches, Republicans have pointed out her Twitter feed as being riddled with tweets described as combative and insulting. Where have we heard that before?

Katherine Tai – United States Trade Representative

Katherine had previously worked for the office as an attorney dealing with US complaints about China trade. She has now been tasked with heading the office that negotiates America’s trade deals.

It is expected that her focus will be working to smooth trade terms between the US and China. She may well be the ideal candidate, both her parents were born in China, and she is fluent in Mandarin.