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Global Interest Rates Recalibrated: The Return of Positive Real Yields

Background

After more than a decade of ultra-low rates, the world’s major economies have entered a new interest-rate regime.
Between 2015 and 2021, most advanced economies saw negative real yields—that is, nominal interest rates minus inflation.
But by 2023–2025, the cycle turned: inflation cooled while nominal rates stayed high, producing the first sustained period of positive real returns since the 2008 crisis.

Figure — Real Long-Term Interest Rates (% YoY)

Lines represent:

United States (blue)
Euro Area (red)
United Kingdom (green)
Japan (gold)

Key Trends (2015 – 2025 Q2)

The Era of Negative Yields (2016 – 2021)
- Inflation outpaced bond yields, pushing real rates below 0 %.
- Japan remained persistently negative due to yield-curve control.
- Euro Area and the UK followed similar paths amid accommodative monetary policy.
The Turning Point (2022 – 2023)
- Inflation shocks forced central banks into their most aggressive tightening in decades.
- The US Federal Reserve led the reversal, pushing real rates above +2 % by 2024.
- The Bank of England and ECB followed, narrowing the gap with US yields.
2025 Stabilization
- Real rates plateau around 2 % (US, UK) and 1 % (Euro Area).
- Japan’s real rate remains near 0 %, reflecting continued deflationary expectations.

The world is adjusting to a “higher-for-longer” interest-rate environment. Investors are once again earning positive real returns, but governments face higher borrowing costs and slower growth.

Economic Implications

Effect	Description	Examples
Fiscal Pressure	Rising real yields increase debt-service costs for governments.	US, Italy
Capital Flows	Higher US yields attract funds away from emerging markets.	Kenya, India
Exchange Rates	Dollar strengthens as real returns rise; yen and euro weaken.	USD/JPY > 160 in mid-2025
Equity Valuations	Higher discount rates suppress stock-market multiples.	Nasdaq and FTSE indices adjust down 5-10 %

Lessons for Kenya and Africa

Debt Refinancing Challenges: Kenya’s Eurobond re-pricing mirrors global real-rate increases. Higher yields mean limited fiscal room for infrastructure projects.
Investment Opportunity: Positive real yields globally signal a return to capital market discipline — Kenya can leverage its sovereign bond credibility to attract investors.
Policy Lesson: Stable inflation and fiscal transparency reduce risk premiums, allowing domestic rates to decline gradually.

Real interest rates link monetary policy and fiscal sustainability — when governments borrow heavily in a high-real-rate world, debt dynamics can deteriorate quickly unless growth accelerates.

For DatalytIQs Academy Learners

To extend this analysis:

Compute real interest rates = nominal bond yield − inflation rate (CPI).
Use Python’s matplotlib to plot multi-country comparisons with custom legends and shaded policy periods.
Explore Granger causality between real rates and exchange rate movements for Kenya vs the US.

Data and Acknowledgment

Source: IMF World Economic Outlook (October 2025) – Figure 1.10 (2) “Real Long-Term Interest Rates.”
Acknowledgment: IMF staff estimates based on Haver Analytics and national central bank data.
Author: Collins Odhiambo Owino, DatalytIQs Academy

November 1, 2025

Fiscal Balances 2025: How Governments Are Managing the Post-Pandemic Hangover

Understanding the Primary Balance

The primary balance measures the difference between a government’s revenues and non-interest expenditures — expressed as a percentage of GDP.
It indicates whether a country’s fiscal policy is expansionary (deficit) or consolidating (surplus).

The chart below tracks fiscal positions for selected economies across four periods:

2015–19 (blue): Pre-COVID baseline years
2020–21 (red): Pandemic-related fiscal stimulus
2025 (projected, yellow): Medium-term fiscal adjustment path
2025 (DSPB, green): “Debt-Stabilizing Primary Balance” — the level needed to keep debt ratios constant

Figure — Primary Balance (% of GDP)

Countries covered: USA, GBR, FRA, DEU, ITA, BRA, IND, CHN

Fiscal Storyline

1. 2015–19: Stability and Modest Deficits
Before the pandemic, most economies maintained small primary deficits (–1 % to –3 % of GDP). Fiscal positions were broadly sustainable, anchored by low interest rates and moderate debt levels.

2. 2020–21: The Pandemic Shock
All major economies experienced historic fiscal deterioration as governments launched unprecedented support packages.

The United States and the United Kingdom ran double-digit primary deficits (–9 % to –10 %).
France, Italy, and India recorded severe slippages due to health and social spending.
China and Brazil also loosened fiscal policy aggressively to cushion demand.

3. 2025: Gradual Consolidation but Uneven Progress

Fiscal balances have improved but remain below pre-pandemic levels.
Germany (DEU) returns close to surplus, reflecting disciplined fiscal management.
Italy and France continue to run moderate deficits, while Brazil and India maintain expansionary stances to support growth.
China’s projected primary deficit near –5 % of GDP highlights persistent stimulus to sustain domestic demand.

Most countries have yet to reach the Debt-Stabilizing Primary Balance (DSPB), meaning public-debt ratios will keep rising unless further adjustments occur.

Fiscal Trade-Offs in 2025

Policy Objective	Fiscal Implication	Examples
Growth Support	Slower consolidation to sustain demand.	India, Brazil
Debt Sustainability	Tighter fiscal policy and expenditure cuts.	Germany, UK
Social Stability	Protecting welfare spending despite debt pressures.	France, China
Green & Digital Investment	Redirecting budgets toward long-term transformation.	EU economies

The global fiscal debate has shifted from stimulus to sustainability — finding the delicate balance between economic recovery and debt control.

Implications for Africa and Kenya

Kenya, like many emerging economies, faces a post-COVID debt overhang with rising interest payments and constrained fiscal space.
The primary deficit is near –3.5 % of GDP (2025 projection), suggesting limited progress toward debt stabilization.
Fiscal reforms, improved tax administration, and targeted subsidies will be crucial to align Kenya’s primary balance with growth priorities.
Lessons from Germany’s fiscal prudence and Brazil’s targeted social spending offer useful models.

A primary balance close to zero is essential for long-term debt sustainability, especially where interest costs are high.

For DatalytIQs Academy Learners

You can extend this analysis by:

Recreating the stacked-period bar chart in Python/Matplotlib to visualize fiscal evolution.
Calculating Kenya’s debt-stabilizing primary balance using the formula:

$DSPB = \frac{(r – g)}{(1 + g)} \times \text{Debt/GDP}$

where r = interest rate and g = GDP growth.
Comparing IMF projections with the Kenya National Treasury’s 2025 Budget Policy Statement.

Data and Acknowledgment

Source: IMF World Economic Outlook (October 2025), Figure 1.9 – “Primary Balance (% of GDP)”
Acknowledgment: IMF Fiscal Affairs Department and Haver Analytics for data compilation.
Author: Collins Odhiambo Owino, DatalytIQs Academy

November 1, 2025

Japanese Export Prices 2025: When Tariffs Meet Currency Shifts

Background

Japan, the world’s third-largest economy and a leading automobile exporter, has long relied on stable trade relations with both North America and the rest of the world.
Yet, 2025 has brought renewed trade frictions, currency volatility, and shifting demand patterns — particularly in the auto industry.

The chart below compares Japanese export prices (standard passenger cars) by destination, showing the impact of tariffs and exchange rate movements over time.

Figure — Japanese Export Price: Standard Passenger Cars

Key Observations (June 2024 – August 2025):

Export prices to North America (blue line) fell sharply — dropping nearly 25 % between early 2025 and mid-2025.
Prices to the rest of the world (red line) remained largely stable around 110 (index value), signaling more stable trade terms.
The divergence after March 2025 marks a significant break — a response to new U.S. tariff measures and a sharp yen depreciation, which made Japanese cars cheaper abroad.

The IMF analysis suggests that exchange-rate movements — not just tariffs — are now the dominant force in global price competitiveness.
For Japan, a weaker yen (around ¥160 per USD in mid-2025) amplified export volumes but squeezed profit margins.

What’s Driving the Divergence?

Factor	Description	Impact
Tariffs on Autos (2025)	Renewed U.S. trade restrictions to protect domestic EV manufacturers.	Japanese exporters cut prices to retain market share.
Yen Depreciation	Sharp fall in the yen improves export competitiveness but lowers the unit price in USD.	Exports become cheaper abroad.
Domestic Cost Pressures	Rising energy and wage costs within Japan.	Firms offset with a currency advantage abroad.
Shift to EVs and Hybrids	Growing demand for electric vehicles globally.	Traditional vehicle exports face declining demand.

Export prices to the U.S. fell steeply, while prices to Asia, Europe, and Africa held steady thanks to diversified trading networks and regional demand growth.

Global Implications

Competitive Devaluation Pressure – Japan’s weak yen raises competitiveness concerns for South Korea, Germany, and China’s auto sectors.
Trade Diversion – The U.S. may increasingly source vehicles from Mexico and Europe instead of Japan.
Inflation Effects – Cheaper Japanese exports help moderate import inflation in North America, offsetting some tariff-driven cost increases.

Tariffs may not raise consumer prices if offset by exchange-rate movements — a crucial lesson for policymakers balancing trade protection and inflation control.

Lessons for Kenya and Emerging Economies

Exchange Rates Matter: A weaker local currency can temporarily boost export competitiveness but erodes purchasing power for importers.
Sectoral Strategy: Kenya can learn from Japan’s diversification—building export resilience across markets reduces vulnerability to policy shocks.
Trade Integration: AfCFTA implementation could allow regional producers to reprice exports more competitively against global shifts.

For DatalytIQs Academy Learners

Apply this concept to practical exercises:

Plot export price indices for two trading partners using real data.
Simulate how a 10 % currency depreciation affects export prices and trade volumes.
Discuss how monetary policy interacts with trade policy in managing competitiveness.

Data and Acknowledgment

Source: IMF World Economic Outlook (October 2025) – Figure 1.8 (3) “Japanese Export Price: Standard Passenger Cars.”
Acknowledgment: IMF staff calculations based on Haver Analytics trade data.
Author: Collins Odhiambo Owino, DatalytIQs Academy

November 1, 2025

🇺🇸 US Import Prices and Tariffs: What 2025 Tells Us About Trade Inflation

Context: Tariffs and the Price Channel

When governments impose tariffs, one of the key questions is: How much do import prices actually rise?
In theory, tariffs make imports costlier, but exchange-rate movements, supplier pricing, and corporate margins often absorb part of the shock.

The IMF’s analysis of US import prices excluding fuels compares two major tariff episodes:

2018 episode (blue line): Tariffs during the US–China trade tensions.
2025 episode (red line): New trade restrictions and supply-chain restructuring under the 2025 global tariff wave.

Figure 1.8 (2) — US Import Prices (Excluding Fuels)

Observation:

Both episodes show limited movement in import prices (index near 100).
In 2018, prices rose slightly after tariffs were imposed, but fell back within a year.
In 2025, despite higher tariffs, import prices remained flat — reflecting stronger dollar appreciation and shifts toward alternative suppliers.

Tariffs in 2025 appear to have had smaller pass-through effects on import prices compared to 2018, suggesting firms have become more adept at diversifying supply chains and absorbing costs.

Why Prices Stayed Stable

Stabilizing Factor	Description
Exchange Rate Buffer	A stronger US dollar offset import price increases.
Global Supply Diversification	Imports shifted from China to lower-cost Asian and Latin American producers.
Corporate Absorption	Retailers and manufacturers narrowed margins to protect demand.
Declining Freight Costs	Post-pandemic normalization of shipping rates reduced trade costs.

Unlike 2018, global markets in 2025 are better positioned to absorb tariff shocks through structural flexibility rather than price inflation.

Implications for Global Trade and Emerging Economies

Reduced Pass-Through: Advanced economies are now less inflation-sensitive to tariff shocks.
Emerging Market Exposure: Developing economies like Kenya still feel indirect effects through imported goods (machinery, electronics).
Trade Re-routing: The redirection of US import demand creates new export opportunities for Asia, Africa, and Latin America.

Tariffs alone don’t always cause visible inflation — their impact depends on currency strength, trade substitution, and supply resilience.

Lessons for Kenya and Africa

Kenya can capitalize on supply-chain diversification by positioning itself as a value-added exporter within the AfCFTA framework.
Building regional manufacturing clusters in electronics, textiles, and logistics could attract trade re-routing from Asia.
Maintaining exchange-rate stability remains essential to shield against imported inflation.

For DatalytIQs Academy Learners

Recreate this analysis by:

Using Matplotlib to plot 2018 vs 2025 tariff episode indices.
Simulating the effect of a 5 % tariff increase on Kenya’s imported goods using exchange-rate elasticities.
Calculating pass-through coefficients to estimate how much global price shocks translate into domestic inflation.

Data and Acknowledgment

Source: IMF World Economic Outlook (October 2025) – Figure 1.8 (2) “US Import Prices Excluding Fuels.”
Acknowledgment: IMF staff calculations using Bureau of Labor Statistics (BLS) import price indices.
Author: Collins Odhiambo Owino, DatalytIQs Academy

November 1, 2025

Inflation Pass-Through 2025: How Trade Shocks Reach the Consumer

Understanding Inflation Pass-Through

Inflation doesn’t arise in isolation — it spreads through trade linkages, production costs, and consumer demand chains.
The IMF’s “Inflation Pass-Through” chart reveals how tariff changes and supply disruptions affect U.S. personal consumption expenditure (PCE) prices between February and July 2025.

Each bar in the figure shows the percentage contribution of:

🟦 Direct effects (immediate impact of import tariffs on final goods prices)
🟥 Indirect effects (cost increases from imported inputs used in domestic production)
🟨 Observed PCE price change for the period

Figure — Inflation Pass-Through by Product Category

Highlights:

Household appliances, musical instruments, and luggage show the largest total pass-through — 7–8 % — indicating high import dependency.
Clothing categories (men’s and women’s) record moderate effects (≈ 6–7 %).
Jewelry and furniture exhibit smaller but noticeable indirect inflation.
Children’s clothing and sports vehicles show near-zero or slightly negative price changes, implying substitution effects or reduced demand.

The data suggests that tariff-driven inflation was not only sector-specific but also regressive — affecting household goods and essentials more than luxury items.

Direct vs Indirect Transmission

Transmission Channel	Description	Economic Impact
Direct Pass-Through	Imported goods become more expensive due to tariffs or shipping costs.	Consumers pay higher retail prices almost immediately.
Indirect Pass-Through	Firms using imported components face higher production costs.	Prices rise more gradually through domestic value chains.

Inflation persists longer when indirect effects dominate — a key challenge in sectors reliant on global manufacturing networks.

Broader Global Context

Tariff escalation and geopolitical realignments since 2024 have elevated import prices globally.
Emerging markets faced compounded effects due to weaker currencies and energy import costs.
The IMF estimates total trade-related inflation added 0.8 % to global consumer prices by mid-2025.

Tariffs designed to protect domestic industries often raise living costs, especially for low- and middle-income households.

Implications for Africa and Kenya

Imported inflation: Kenya’s exposure is moderate but rising — household electronics, vehicles, and textiles are sensitive to global trade disruptions.
Policy response: Enhancing local value addition and intra-African supply chains (under AfCFTA) can reduce vulnerability to imported price shocks.
Monetary stance: CBK’s focus on maintaining a stable shilling helps cushion indirect pass-through effects.

A 10 % rise in shipping costs from Asia could increase local electronics prices by 3–4 % within a quarter due to high import reliance.

For DatalytIQs Academy Learners

You can replicate this IMF figure analytically:

Use a stacked bar chart to decompose inflation by sector (direct vs indirect).
Apply an input–output matrix to estimate second-round effects in Kenya’s manufacturing sector.
Analyze tariff elasticities to measure price sensitivity by product type.

Data and Acknowledgment

Source: IMF World Economic Outlook (October 2025), Figure 1.7 (2) “Inflation Pass-Through.”
Acknowledgment: IMF staff calculations using Haver Analytics and U.S. PCE data.
Author: Collins Odhiambo Owino, DatalytIQs Academy

November 1, 2025

Services Inflation 2025 , The Sticky Side of Global Prices

Why Services Matter

While goods prices have eased worldwide, services inflation—covering rent, transport, health, hospitality, and education—remains stubbornly high.
Services are labor-intensive and slow to respond to monetary policy, making them the last mile of global disinflation.

Figure 1.6 (4) — Services Inflation Trends (2019 – 2025)

Key Regions:

United States (blue)
Euro Area (red)
Other Advanced Economies (gold)
China (green)
Other Emerging and Developing Economies (EMDEs) – blue-shaded band

Global Patterns and Persistence

1. Gradual Rise (2020 – 2022):
As pandemic restrictions lifted, global demand for travel, housing, and leisure surged. Tight labor markets lifted wages, pushing up prices in core services sectors.

2. Sticky Plateau (2023 – 2025):
Unlike goods inflation, services inflation declined only slowly.

U.S. and Euro Area hover around 3–4 %.
Other AEs mirror similar patterns as wage negotiations catch up with living costs.
China remains below 1 %, reflecting weaker consumption.
EMDEs show the widest variability (3–9 %), dominated by transport and education costs.

Services inflation has replaced food and energy as the main obstacle to achieving 2 % inflation targets.

Why Services Inflation Is So Sticky

Structural Factor	Description	Effect on Prices
Labor Intensity	Wages are 60–80 % of service-sector costs.	Rising wages sustain inflation even as input prices fall.
Limited Tradeability	Most services cannot be imported cheaply.	Domestic cost pressures remain local.
Housing Shortages	Tight rental markets across cities.	Persistent shelter inflation.
Health & Education	High demand post-pandemic.	Structural inflation above target.

Central banks face a slow transmission of rate hikes to service prices because of multi-year contracts and labor agreements.

Regional Reflections — Africa and Kenya

Kenya’s services inflation averages ≈ 4 %, driven by transport and housing.
Public transport fare adjustments and energy pass-through effects mirror global pressures.
Growing demand for private education and healthcare adds to non-tradable inflation.
CBK’s 9.25 % policy rate anchors expectations but cannot fully offset domestic structural drivers.

Service-sector inflation demonstrates why macroeconomic stability depends on supply-side policy — urban housing, skills development, and productivity reforms.

For DatalytIQs Academy Learners

Recreate this chart using Python’s fill_between() for the EMDE band.
Compare core goods vs services inflation to illustrate post-pandemic divergence.
Conduct a correlation analysis between Kenya’s services inflation and global indices.
Simulate policy scenarios showing how interest rates affect service prices over 12–18 months.

Data and Acknowledgment

Source: IMF World Economic Outlook (October 2025) – Figure 1.6 (4) “Services Inflation.”
Acknowledgment: Haver Analytics and IMF staff for data and visual insights.
Author: Collins Odhiambo Owino, DatalytIQs Academ

November 1, 2025

Core Goods Inflation 2025: The Great Price Reset

Understanding Core Goods Inflation

Core goods inflation isolates price changes in non-food, non-energy manufactured goods — such as cars, electronics, clothing, and household items. It reflects global supply chains, shipping costs, and industrial demand rather than local food or fuel shocks.

IMF data (2019–2025) compares trends across:

United States (blue)
Euro Area (red)
Other Advanced Economies (AEs) (gold)
China (green)
Other Emerging and Developing Economies (EMDEs) (light blue band)

Global Patterns in Core Goods Inflation

1. The Pandemic Supply Shock (2020–2022):

Inflation in goods surged worldwide due to supply-chain disruptions, logistics bottlenecks, and a spike in shipping costs.
The United States saw the sharpest rise, peaking above 12 % in 2022 as stimulus-driven demand collided with scarce inventories.
China’s inflation fluctuated widely, rising early due to domestic lockdown cycles, then falling sharply amid manufacturing overcapacity.
Euro Area and Other Advanced Economies followed similar paths but with smaller amplitudes.

2. The Decline (2023–2025):

As supply chains normalized and global freight costs dropped, goods inflation fell rapidly.
By 2025, most advanced economies saw rates return to around 1–2 %, consistent with pre-pandemic norms.
EMDEs retained greater volatility due to exchange-rate depreciation and dependence on imported manufactured goods.

This “goods disinflation” marks the clearest victory in the global fight against inflation — but it also hides persistent pressures in services and housing, which now dominate inflation drivers.

Structural Forces Behind Goods Disinflation

Factor	Description	Economic Impact
Supply-Chain Normalization	Global shipping, ports, and chip supplies recovered by late 2023.	Lower producer and retail prices.
Commodity Price Moderation	Oil, metals, and fertilizers stabilized below 2022 peaks.	Reduced input costs.
Demand Rotation	Consumers shifted from goods to services post-pandemic.	Dampened goods demand.
Monetary Tightening	Higher interest rates curbed credit-financed purchases (cars, appliances).	Softened retail inflation.

Goods inflation is largely under control, but the IMF cautions that energy transitions, re-shoring, and new trade tariffs could reintroduce cost pressures later in the decade.

Implications for Africa and Kenya

Kenya’s imported inflation has eased with lower global goods prices, stabilizing consumer costs for manufactured imports.
Local manufacturing still faces high logistics and input costs, limiting full transmission of global disinflation.
Policies that promote domestic industrial capacity and regional value chains can help shield against future supply shocks.

Kenya’s experience shows how open economies import both inflation and disinflation, emphasizing why macroeconomic management must align with global production cycles.

For DatalytIQs Academy Learners

Students can extend this dataset into applied learning exercises:

Plot core goods vs. core services inflation to visualize divergence.
Apply time-series decomposition to isolate supply shocks (2020–22) and recovery phases (2023–25).
Model inflation pass-through using exchange-rate data for Kenya and other Sub-Saharan economies.

Data and Acknowledgment

Source: IMF World Economic Outlook (October 2025) – Figure 1.6 (3) “Core Goods Inflation.”
Acknowledgment: IMF staff and World Bank trade data teams for open-access economic visualizations.
Author: Collins Odhiambo Owino, DatalytIQs Academy

November 1, 2025

Core Inflation 2025: The Last Mile of the Disinflation Battle

What Is Core Inflation?

Core inflation measures the underlying trend in prices by excluding volatile food and energy items. It reflects the true persistence of inflation within an economy — often driven by wages, housing, services, and expectations.

The IMF’s latest Core Inflation chart tracks five major groups:

United States (blue)
Euro Area (red)
Other Advanced Economies (AEs) (gold)
China (green)
Other Emerging and Developing Economies (EMDEs) (blue band)

Recent Trends (2019 – 2025)

Key observations:

Global Peak (2022–23):
- Core inflation rose above 6 % in advanced economies, driven by pandemic-era demand surges, supply bottlenecks, and energy shocks.
- EMDEs experienced broader dispersion — some exceeding 12 % — reflecting food insecurity and currency depreciation.
Gradual Easing (2024–25):
- U.S. and Euro Area core inflation declined but remains well above central-bank targets (≈ 2 %).
- The Euro Area’s slower descent underscores the stickiness of services inflation and wage adjustments.
China’s Subdued Path:
- Inflation stayed under 2 % throughout, reflecting excess capacity, muted demand, and deflationary pressures.

The “last mile” of disinflation is proving the hardest — prices of non-tradables (rent, health, transport services) are still rising faster than goods prices.

Policy Dilemmas for 2025

Challenge	Advanced Economies	Emerging Economies
Wage Persistence	Tight labor markets keep service inflation high.	Wages lag inflation; real incomes are still recovering.
Interest Rates	Central banks keep policy rates “higher for longer.”	Selective easing to support growth, balanced against FX risks.
Fiscal Space	Limited — focus on debt stabilization.	High debt service burdens constrain subsidies and social spending.
Inflation Expectations	Anchored but fragile.	Vulnerable to exchange-rate and food-price shocks.

The IMF warns that premature easing could reignite inflation, but excessive tightening may undermine growth and financial stability.

Implications for Africa and Kenya

Kenya’s core inflation (≈ 4.5 %) tracks global averages but remains within the CBK’s target band.
Domestic fuel price reforms and better food supply chains helped contain pressures.
A stronger shilling and CBK’s 9.25 % policy rate support price stability.
The “imported inflation channel” has weakened as global commodity prices fall.

Insight for Students:
Kenya’s price dynamics mirror the global core trend — slower to fall than headline inflation. It demonstrates how domestic wages, services, and expectations sustain inflation momentum.

For DatalytIQs Academy Learners

You can extend this analysis by coding your own core inflation visualization:

Use matplotlib.pyplot.fill_between() to recreate the blue band for EMDE uncertainty.
Overlay Kenya’s KNBS core CPI data to compare with global trends.
Compute rolling averages to detect when disinflation began locally versus globally.

Data and Acknowledgment

Source: IMF World Economic Outlook (October 2025) – Figure 1.6 “Core Inflation.”
Acknowledgment: IMF staff for open data on global price trends and inflation analytics.
Author: Collins Odhiambo Owino, DatalytIQs Academy

November 1, 2025

Global Inflation Trends 2025: Disinflation, Divergence & Policy Tightening

By Collins Odhiambo Owino
Author | DatalytIQs Academy
Data Source: International Monetary Fund (IMF) World Economic Outlook – October 2025

Headline Overview

After two years of pandemic- and war-driven price surges, global inflation continues to decline in 2025. Yet the path of disinflation differs sharply between advanced and emerging economies.

The IMF’s Global Inflation Trends chart shows year-on-year consumer-price movements from 2019 to 2025 for:

United States (blue)
Euro Area (red)
Other Advanced Economies (AEs) (gold)
China (green)
Other Emerging and Developing Economies (EMDEs) (light blue band)

Headline Inflation Patterns

Peak and Retreat:

Inflation spiked between 2021 and mid-2022, hitting double-digit levels in many advanced economies.
The drivers: global supply-chain bottlenecks, post-pandemic demand rebound, and energy-price shocks linked to the Ukraine conflict.
Since late 2023, inflation has gradually eased as commodity prices normalized and central banks raised interest rates aggressively.

Regional Highlights:

United States: Inflation peaked above 9% in 2022, falling below 3% by mid-2025 as monetary policy remained tight.
Euro Area: Slightly lagged the U.S., owing to persistent energy-price pressures and slower wage adjustments.
China: Experienced mild inflation averaging 1–2%, reflecting weaker domestic demand and overcapacity in manufacturing.
Other EMDEs: Displayed the widest volatility range (blue shaded band ≈ 4 – 16%), emphasizing exposure to currency depreciation and food-price shocks.

Core Inflation Dynamics

While headline inflation cooled, core inflation (excluding energy & food) remains elevated in many economies:

Sticky service prices and wage growth keep core inflation around 4–5% in advanced economies.
EMDEs face second-round effects from earlier commodity surges and exchange-rate passthrough.

Central banks must walk a fine line—maintaining credibility on inflation while avoiding over-tightening that could dampen growth.

Policy Responses and Outlook

Policy Area	Advanced Economies	Emerging Economies
Monetary Policy	“Higher for longer” stance by the Fed and ECB to prevent inflation relapse.	Selective tightening—India and Brazil easing gradually; Kenya and Ghana remain hawkish.
Fiscal Policy	Gradual consolidation, targeting debt sustainability.	Fiscal discipline under IMF programs; focus on social protection and food security.
Inflation Target	2 % targets remain intact but are challenged by wage persistence.	Flexible inflation targeting is gaining traction.

Projection: Global inflation expected to average 4.8 % in 2025 and 4.2 % in 2026, still above pre-pandemic norms.

Implications for Africa and Kenya

Imported Inflation: Kenya’s price pressures mirror global energy and fertilizer costs.
Monetary Tightening: CBK rate at 9.25 % (Oct 2025) keeps inflation ≈ 4.6 %, within target.
Exchange-Rate Link: A weaker shilling raises import costs, but disinflation in global oil markets offsets part of the pressure.
Policy Advice: Kenya should maintain a cautious monetary policy while accelerating domestic food and energy resilience.

Inflation in Kenya cannot be viewed in isolation; it is interconnected with global monetary cycles and commodity markets.

For DatalytIQs Academy Learners

Build a Python notebook to replicate the IMF chart using Matplotlib (fill_between for the EMDE band).
Apply rolling-window averages to study how inflation volatility differs between regions.
Simulate the impact of interest-rate changes on inflation trajectories via simple AR models.
Link global inflation trends to Kenya’s CPI data from KNBS and CBK for a comparative project.

Data and Acknowledgment

Source: IMF World Economic Outlook (October 2025) – Figure 1.6 Global Inflation Trends.
Additional References: OECD Statistics Portal and World Bank Commodity Outlook 2025.
Acknowledgment: IMF staff for data visualization and open access to macroeconomic datasets.
Author: Collins Odhiambo Owino, DatalytIQs Academy

November 1, 2025

Global Growth in Transition: Insights from the IMF’s 2025 Economic Outlook

By Collins Odhiambo Owino
Author | DatalytIQs Academy
Data Source: International Monetary Fund (IMF), OECD, and World Bank Global Economic Prospects (2025–2026)

Introduction

The global economy is navigating a delicate transition in 2025 — balancing recovery momentum with tightening financial conditions and policy uncertainty.

New data from the IMF World Economic Outlook (October 2025) reveals that while growth continues, it remains uneven across regions, constrained by trade frictions, inflation persistence, and subdued consumer confidence.

This post unpacks the global patterns behind the numbers, focusing on GDP growth contributions, consumer sentiment, and business confidence across leading economies.

Figure 1.3 — Contributions to Quarterly GDP Growth

Source: IMF World Economic Outlook (Oct 2025)

This figure shows how private consumption, public spending, investment, and net exports have shaped growth across major economies — the United States, Euro Area, and Japan.

United States

Growth remains consumer-driven, with private consumption contributing the largest share.
Investment fluctuated amid tighter borrowing costs and elevated policy uncertainty.
Net exports weakened due to a strong dollar and softer global demand.
GDP growth revived in Q2 2025, signaling resilience in labor markets and fiscal stability.

🇪🇺 Euro Area

GDP growth remained subdued, driven mostly by public consumption and investment recovery.
Industrial output lagged due to high energy costs and geopolitical fragmentation.
The region’s recovery is modest, averaging 1.2–1.5% annualized growth.

🇯🇵 Japan

Growth momentum weakened in early 2024, followed by mild rebounds in mid-2025.
Exports and investment supported modest gains, while consumption softened under inflationary pressures.

Across advanced economies, domestic demand continues to sustain growth, but high interest rates and slower global trade remain major constraints.

Figure 1.4 — Consumer and Business Confidence

Source: OECD and IMF Staff Calculations

Confidence levels — a proxy for expectations about future growth — reveal the global economy’s mixed sentiment:

Consumer Confidence

China shows persistent pessimism below 100, reflecting slower household spending and property market stress.
The Euro Area remains steady but cautious, constrained by inflation and wage stagnation.
The U.S. has recovered modestly since 2023, buoyed by strong employment data.
Rest of the World (ROW) trends mirror moderate optimism, reflecting diverse regional recoveries.

Business Confidence

Global business sentiment declined in early 2024 but rebounded slightly by mid-2025.
Uncertainty surrounding tariffs, global demand, and energy transitions continues to cloud investment decisions.

Interpretation: Confidence indices above 100 signal optimism; below 100 indicate uncertainty. The narrow band across regions underscores global fragility — firms and households remain cautious despite easing inflation.

Global Economic Implications

Indicator	2025 Trend	Key Implications
GDP Growth	Global: 3.2%	Slower trade and tighter monetary policy dampen momentum.
Advanced Economies	1.5%	Limited fiscal space, cooling demand.
Emerging Economies	4.3%	Asia drives global expansion, especially India and ASEAN.
Consumer Confidence	Mixed	Households are cautious amid high living costs.
Business Confidence	Improving slightly	Investment sentiment is stabilizing post-tariffs.

Growth persists but remains uneven, a reflection of adjustment to a “higher for longer” interest-rate world and evolving global trade structures.

Relevance to Africa and Kenya

Export Linkages: Slower global demand reduces Kenya’s tea, horticulture, and coffee exports.
Investment Outlook: Tight global liquidity raises borrowing costs for African economies.
Business Sentiment: Regional confidence improves with the African Continental Free Trade Area (AfCFTA), offering an alternative growth path through intra-African trade.
Policy Takeaway: Kenya and Sub-Saharan Africa must enhance productivity, diversify exports, and invest in digital and green transformation to offset global volatility.

For DatalytIQs Academy Learners

Students and researchers can use this data to:

Recreate GDP decomposition plots in Python (Matplotlib/Pandas).
Analyze confidence indicators as leading predictors of economic cycles.
Simulate the effects of tariffs and trade uncertainty on global growth.
Develop country-level dashboards connecting global projections to Kenya’s macroeconomic indicators.

Data and Acknowledgment

Sources:

International Monetary Fund (IMF), World Economic Outlook (October 2025).

Organisation for Economic Co-operation and Development (OECD) Confidence Indices.

World Bank Global Economic Prospects (2025–2026).

Acknowledgment:
IMF and OECD data teams for open access to macroeconomic datasets.

Author: Collins Odhiambo Owino, DatalytIQs Academy

November 1, 2025