Global inflation forecast:
Will prices go up?
- Global core inflation is projected to increase to 3.4%ar (annualized rate) in the second half of 2025, largely due to a tariff-related U.S. spike.
- While cost pressures will likely be concentrated in the U.S., underlying inflation elsewhere, particularly in Europe, could moderate further.
- In China, where the pricing environment remains weak, J.P. Morgan Global Research expects low CPI inflation and PPI deflation for the rest of the year.
- Over in EM, domestic demand remains palpably soft and should pave the way for inflation to move lower.
Inflation has moderated across the globe with the exception of the U.S., where it has remained sticky. However, geopolitical instability in the Middle East could precipitate price shocks, and the full impact of U.S. tariffs remains to be seen. How will these dynamics play out in the coming months, and what’s the global inflation forecast for the rest of 2025 and beyond?
Global
J.P. Morgan Global Research sees global core inflation increasing to 3.4%ar (annualized rate) in the second half of 2025. In addition, it expects a synchronized downshift in global growth to 1.4%ar, largely due to a rotation in pressures toward the U.S.
Several related impulses set the stage for this stagflationary tilt. “First, the transitory boost to the global goods sector in advance of actual and threatened tariff hikes is starting to fade. Downward growth pressure will be reinforced by two factors: a tariff tax hike on U.S. household and businesses, and a decline in global business sentiment related to disruptive U.S. policies,” said Bruce Kasman, chief global economist at J.P. Morgan.
While cost pressures will likely be concentrated in the U.S., underlying inflation elsewhere is expected to moderate further to below 3%ar. In particular, there could be a slide in European core inflation, with softening being relatively broad-based across regions. This suggests a sizeable gap between the U.S. and the rest of the world could open up in the coming months.
Despite these divergent inflation outcomes, J.P. Morgan Global Research continues to look for central bank easing across the board. “The U.S. Fed is signaling that it will remain cautious in the face of a stagflationary tilt, but it should respond quickly to signs of labor market weakness. A moderation in core inflation outside the U.S. will align with slowing growth, giving a green light for further cuts elsewhere,” Kasman said.
Core CPI forecasts
%3m, saar; JPM forecasts shaded
Source: National sources, J.P. Morgan
Cost pressures will likely be concentrated in the U.S., with underlying inflation in EM and the euro area (excluding China and Turkey) expected to moderate.
US
While tariffs’ impact on consumer prices has been muted thus far, they are expected to push U.S. core inflation higher in the second half of 2025.
“For the remainder of the year, the inflation story is likely to be centered on tariffs. Through May, there was scant evidence that tariffs are already being felt in a big way in consumer prices. However, consistent with the experience of 2018–19, we expect that it will take two to four months for the peak effect of tariffs to be seen,” said Michael Feroli, chief U.S. economist at J.P. Morgan. As such, core Personal Consumption Expenditures (PCE) inflation in the third quarter is expected to climb to 4.6% at a quarterly annualized rate.
Labor market conditions could temper some of the inflation shock. “While survey measures of inflation expectations are elevated, we think a softening labor market will limit workers’ ability to demand and receive the sort of wage gains that would foster a wage-price spiral.” Feroli said. “Even so, we look for core PCE to end the year at an uncomfortably firm 3.4%.”
To this end, J.P. Morgan Global Research expects the next Fed rate cut to occur in December, well after the peak in inflation prints, followed by three more cuts in early 2026.
June jobs report: Better than expectations
UK
In the U.K., inflation recently surprised to the upside, largely driven by higher prices in services. Headline CPI inflation for June rose from 3.4% to 3.6%oya, while core inflation increased from 3.5% to 3.7%.
“Oil and gas prices have fallen, but this is offset by the surprise in the June data and our assumption is that little of this will be reversed in subsequent months,” said Allan Monks, chief U.K. economist at J.P. Morgan. To this end, J.P. Morgan Global Research has raised its forecast for U.K. headline inflation to 3.7% for the third quarter of 2025 — above the Bank of England’s (BoE) current forecast of 3.5%.
“The BoE’s focus has shifted more toward the deteriorating labor market of late, and its assessment here could yet prove dominant. But ongoing stickiness in underlying inflation will leave some on the Monetary Policy Committee more hesitant about accelerating the pace of easing,” Monks added.
Overall, the BoE will likely stick to a gradual easing path, with a cut of 25 basis points (bp) taking place in August and then quarterly thereafter. The central bank is expected to reach a terminal rate of 3.5% by the first quarter of 2026.
Europe
Inflation is poised to move broadly lower across Western Europe in the second half of 2025, falling below 2% in both the eurozone and Sweden but hovering close to 3% in Norway.
In the euro area, policy rates have moved into the European Central Bank’s (ECB) estimated neutral range, suggesting a pause is in order. However, wage pressures look to be rapidly abating and additional disinflationary pressures could stem from a stronger currency. “If we are right that growth dips below 1%ar in the second half, the environment is ripe for modest additional easing,” Kasman said.
Similar considerations in Sweden warrant a further cut by the Riksbank. “For both the ECB and the Riksbank, an intensification of the U.S. and EU trade war could be a trigger for additional cuts,” Kasman added.
Over in Norway, Norges Bank recently delivered a surprise cut and signaled a further easing bias. As such, J.P. Morgan Global Research expects the central bank to slash rates by another 50 bp by year-end.
China
China’s pricing environment remains soft, with the outperformance of exports versus domestic activity and industrial production versus consumption leading to a demand-supply imbalance. Headline CPI turned positive in June at 0.1%oya after hovering in negative territory for four months, largely driven by modest gains in food and household appliances. PPI deflation came in at -3.6%oya on the back of lower demand for mining and raw materials, as well as price pressures in exporting sectors.
Looking ahead, J.P. Morgan Global Research maintains its forecasts of low CPI inflation and PPI deflation for the rest of the year. On the monetary policy front, slower growth and low inflation could justify further rate cuts, but the pace will likely be constrained by financial stability and currency stability considerations.
Emerging markets
Despite the boost to EM growth in the first quarter from front-loaded exports, domestic demand remains palpably soft and should pave the way for inflation to move lower. As such, J.P. Morgan Global Research expects EM (ex-China) CPI inflation to moderate to 5.3%oya in the second half of 2025, down from 5.8%oya in the first half — albeit with some country-specific exceptions.
These conditions support further policy easing. “High-yielder EMs, which entered the tightening cycle aggressively, retain significant room to deliver monetary easing as inflation falls toward target,” said Jahangir Aziz, head of Emerging Market Economics Research at J.P. Morgan. In addition, the weak dollar has and will allow EM central banks the space to ease without endangering financial stability.
Brazil, previously an outlier with 250 bp of tightening earlier this year, saw a sharply lower May inflation print. As a result, the Banco Central do Brasil (BCB) is expected to start cutting in December, alongside the Fed — though the 50% tariff recently imposed by the U.S. could temper the easing. Clear disinflation trends should also enable substantial easing in Colombia (150 bp) and Mexico (125 bp).
Low-yielder EMs are also likely to continue easing. “Notably, we maintain an out-of-consensus call for 75 bp of additional rate cuts by the Bank of Korea (BoK) by mid-2026,” Aziz added.
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