Number 15

The global growth forecast has been revised downwards to 2.7% for 2025 and 3.0% for 2026 (from 3.1% and 3.0% previously),1 while inflation is now projected at 3.4% and 2.9% for the same years. The baseline scenario remains framed, to some extent, by the controlled slowdown by central banks, key macroeconomic factors that support the slow but sustained drop in inflation, and a risk map that calls for both extra caution and possible divisions as movements become less coordinated. Furthermore, economic activity and prices are also subject to competing supply and demand pressures, with the eventual outcome hinging on political decisions that will determine which forces prevail.

The United States is expected to be most affected, facing a sharper economic deceleration alongside increased inflationary pressures that will hamper the Federal Reserve’s actions. In contrast, the Eurozone may experience a milder growth slowdown and better-controlled inflation. This, combined with the extraordinary fiscal stimulus implemented, could help cushion the downturn. In Latin America, the implications would remain mixed: while lower external demand is expected due to the direction of trade policy, which will particularly affect countries most integrated into value chains with the United States, such as Mexico, there may also be opportunities, as these countries could benefit from a redirection of trade and an influx of capital flows. In Asia, despite the continued economic dynamism, trade tensions appear somewhat more pronounced, with less conciliatory measures, particularly in China, leading to a reduction in forecasts for the region.

The U.S. Federal Reserve decided in May to keep its benchmark interest rates unchanged at the 4.25% to 4.50% range for its third consecutive meeting, with unanimous support from the Federal Open Market Committee (FOMC). No changes were announced to the balance sheet reduction strategy, meaning the pace of quantitative tightening (QT) will continue as planned, with asset sales totaling 5 billion dollars per month.

Since the last meeting, the situation can be summarized as one of high volatility driven by trade uncertainty. However, the data provides little evidence to justify a shift in policy. Economic activity has generally remained positive, with the PMI and ISM, among other sentiment indicators, signaling continued expansion. Although there was a decline in GDP, it appears to be driven by atypical factors. The labor market shows no signs of weakening, and inflation data continues to moderate gradually, although it remains above the target. The tariff policies announced on April 2 have yet to fully materialize. Therefore, responding to them falls outside the Federal Reserve’s mandate, given the lack of clarity around the final format of these tariffs and their potential impact on the economy.

Regarding employment, there are still no signs of weakness in the labor market. The unemployment rate held steady in April at 4.2%, with 177,000 new jobs added and little change in the labor force participation rate, which showed a slight improvement—rising to 62.6% from 62.5% the previous month. From another perspective, higher-frequency data such as weekly unemployment claims showed an uptick in layoffs; however, these remain within the normal range. The JOLTS survey also showed little change, with 7.2 million job openings and a hiring rate of 3.4%, indicating a balanced labor market so far.

In terms of economic activity, first-quarter GDP figures showed a slight contraction (-0.3%), although they were better than preliminary estimates. The decline is mainly explained by a deterioration in net trade and lower government spending. The trade variable reflects an unusual spike in imports ahead of the implementation of new tariffs, a factor that could reverse and normalize if negotiations progress. Meanwhile, the drop in public spending was partly offset by growth in the private sector, where early signs of easing uncertainty are beginning to appear. This could positively affect consumer and business confidence (see Charts 1 and 2).

Regarding inflation, the general Consumer Price Index (CPI) rose by 0.2% month-on-month in April, bringing the annual rate to 2.3%. This increase was mainly driven by lower energy prices—a trend expected to persist based on current oil and gas market conditions. As for the core inflation rate, which excludes energy and food, it also declined to 2.8% year-over-year, largely due to fading pressure from the services sector and stable figures in the goods sector (see Chart 3).

In terms of expectations, concerns about potential price increases in the future remain present, as shown by the upticks in various consumer surveys. At the same time, producer surveys align with this view, acknowledging the possibility of introducing and passing on certain tariff surcharges to final prices in the future (see Chart 4).

However, despite the lack of a consistent framework providing clarity for future spending and investment decisions, it is worth noting that some optimism seems to be growing again. This anticipates both a potential resolution of trade agreements with the United States’ major partners and a consumer whose expectations diverge from actual data, as indicated by initial forecasting exercises (see Chart 5). These expectations are in line with the outlook presented in our most recent report, 2025 Economic and industry outlook: second-quarter forecast update.

For now, the Federal Reserve is sticking to its position of not acting preemptively or responding to signs of a supply shock. It is waiting for data that might indicate a need for action. The pause until the next scheduled meeting in June, when new inflation and growth forecasts will be available, along with new information on tariffs and their potential impact, will allow for a more precise response. This idea is also reinforced by considering that, in line with economic theory, current interest rates remain within the range considered appropriate (see Chart 6).

In fact, the Fed has acknowledged the increase in uncertainty for both risks, meaning that the conditions for reducing interest rates will be considered more of a reactive measure rather than a preventive one moving forward. Similarly, after recent market turbulence, the probabilities of a rate cut (as indicated by swaps) have once again aligned with the Federal Reserve’s message. The curve has moderated, and June now seems likely to see another pause as the most probable option (see Chart 7).

The complete analysis of economic and industry perspectives can be found in the report 2025 economic and industry outlook: second-quarter forecast update, prepared by MAPFRE Economics, which is available at the following link: