The world economy, at a glance.

The Fed is tightening at 3.88% and the dollar is +0.3% against majors over 12 months. US rates and the dollar set global financing conditions, which steer capital into or out of emerging markets, moving their currencies, inflation and, in the end, their central banks' decisions.

The Fed has been raising its policy rate, now 3.88% (last move +25 bp in Sep 2026). Because the dollar dominates global trade, debt and reserves, US rates set the price of money far beyond the US.

Over 12 months the dollar gained 0.3% on average against 8 major currencies. Higher US rates relative to elsewhere draw money into dollar assets and lift the dollar; Fed cuts tend to weaken it.

The US real policy rate is +0.5%. Roughly half of cross-border bank loans and international debt are in dollars, so US rates set borrowing costs for governments and firms worldwide, and investors' appetite for risk.

When US rates fall and the dollar weakens, investors search for yield in emerging markets; when the Fed tightens, money flows back home. With the Fed hiking and the dollar little changed, the push on EM flows is toward outflows.

The median emerging-market currency moved -0.1% against the dollar over 12 months (dollar pegs excluded). Inflows support EM currencies; outflows weaken them and raise the local cost of dollar debt.

Median inflation across 25 emerging economies is 4.3%, versus 3.6% a year earlier. A weaker currency raises import prices (pass-through is typically stronger in EMs than in advanced economies), so dollar swings show up in EM inflation.

Of 16 emerging-market central banks tracked, 7 cut and 5 raised rates over the past 12 months. A Fed easing cycle and a softer dollar give them room to cut without destabilising their currencies; Fed hikes often force them to follow.

The world economy grew 3.5% in 2025 (3.5% in 2024). Interest rates, the budget and foreign demand set spending; output then moves jobs, tax receipts and imports, and over time living standards. Hover or tab through a step for details.

The median real policy rate is +0.8%, above zero, so monetary policy is restraining borrowing and spending. Of 35 central banks tracked, 14 cut rates in the past 12 months, 15 hiked and 6 held; the median policy rate is 4.25%.

The budget balance went from -5.1% of GDP in 2024 to -5.0% in 2025. The stance barely changed, so fiscal policy adds little new push either way. Part of any change is the cycle itself, since tax receipts rise in booms.

For the median economy, exports were 35% of GDP in 2025 (34% a year earlier). Trade doesn't add to world output on net, since every export is someone's import, but it spreads demand and specialisation gains across borders.

Real GDP grew 3.5% in 2025, after 3.5% in 2024; the IMF projects 3.1% for 2026. Output adds up spending by households, firms, government and foreigners (net of imports), adjusted for inflation.

Unemployment (advanced economies) rose to 4.7% in 2025 (4.6% in 2024). Okun's law: growth above trend usually pulls the jobless rate down, roughly half a point for each point of extra growth, while growth below trend pushes it up.

Growth feeds the budget through automatic stabilisers: more income and spending lift tax receipts, while fewer jobless claims cut outlays. The IMF sees the balance moving from -5.0% of GDP in 2025 to -5.5% in 2026.

Part of each extra unit of spending goes on foreign goods, adding to other countries' output rather than the importer's GDP. Imports were 34% of GDP in 2025 for the median economy, versus 33% a year earlier.

Output per person was $14.7K in 2025 (+5.0% on 2024), measured in current US dollars, so exchange rates and inflation move it too. Lasting gains come from productivity: more jobs, capital and better technology per worker.