inflation – Global Times

The Fed’s First Rate Hike in Three Years: What Comes Next on October 27

The U.S. Federal Reserve has changed direction. On September 16, the Federal Open Market Committee raised its benchmark rate by a quarter of a percentage point to a range of 3.75% to 4.00%. The vote was unanimous, and it was the first increase since July 2023.

Why the Fed Moved

Chair Kevin Warsh pointed to three developments since the committee’s July decision to hold rates steady: a strong economy, particularly in the labor market; inflation that stayed elevated through the summer; and the ongoing energy shock from the Iran war, with diesel prices setting fresh records on the day of the decision. Warsh said inflation has been too high for too long, and described the move as serious and responsible. Three members had already dissented in July in favor of a hike, so the September decision confirmed a direction that had been building for months.

Political Pushback, With a Twist

President Donald Trump, who appointed Warsh, has argued that rates should be substantially lower. Yet he has continued to express confidence in the chair personally, directing his criticism at the broader committee instead. Because the September vote was unanimous, the decision could not be pinned on one person.

The Next Meeting

The committee meets again on October 27, just a week before the U.S. midterm elections, and then in early December. Goldman Sachs said in late September that it expects one more increase in October and then a pause, though it cautioned that the outlook depends heavily on the oil market. Futures markets have at times priced in further tightening beyond that.

The Bigger Dilemma

Higher interest rates cannot reopen a shipping lane or add a barrel of crude. What they can do is restrain demand so that an energy price spike does not turn into broad, entrenched inflation. The risk is overshooting and weakening an economy that did not cause the shock in the first place. With the IMF now projecting global headline inflation of 4.7% this year, central banks everywhere face the same balancing act.

This article reflects reporting available as of October 16, 2026. Fast-moving events may have changed since.

IMF Lifts 2026 Growth Forecast to 3.1% as the AI Boom Offsets the Energy Shock

By globaltimesWorld NewsAI investment, global economy, IMF, inflation

The International Monetary Fund nudged up its outlook for the world economy this week, while warning that the picture beneath the headline number is increasingly uneven. In its October World Economic Outlook, titled “Resilience Under Strain, Urgent Choices,” the Fund expects global output to grow 3.1% in 2026, up 0.1 percentage point from its July forecast, before accelerating to 3.4% in 2027. Growth in 2025 is estimated at 3.5%.

A Two-Speed Economy

The IMF’s central argument is that the global economy is neither simply slowing nor speeding up. Instead, growth is being reallocated according to how exposed each country is to two forces: the energy shock stemming from the war involving Iran, and the surge in spending on artificial intelligence. Economies lifted by the AI investment boom are helping to offset the drag on those hit hardest by costlier fuel.

Advanced economies are projected to expand 2.1% this year and 1.8% in 2027. Emerging market and developing economies are forecast to slow to 3.7% in 2026 before rebounding to 4.4% next year. Among the largest economies, the United States is projected to grow 2.3% in both 2026 and 2027, while China’s expansion is expected to ease to 4.5% this year and 4.0% in 2027, largely because of weak domestic demand. The United Kingdom’s 2026 forecast was raised to 1.3%, though its 2027 outlook was trimmed to 1.2%.

Inflation Moves the Wrong Way

Prices are the less comfortable part of the report. The Fund expects global headline inflation to climb from 4.1% in 2025 to 4.7% in 2026 before easing back to 4.1% in 2027. That path helps explain why central banks have had little room to cut interest rates, and why the U.S. Federal Reserve has instead raised them.

AI as an Engine of Growth

Speaking at the IMF and World Bank annual meetings in Bangkok, Managing Director Kristalina Georgieva said accelerating investment in AI infrastructure is one of the main reasons global growth is holding near 3%. The Fund also credited changes in energy supply routes, higher output in some producing countries, and a shift toward alternative energy for the economy’s resilience through a series of shocks.

The flip side, as many analysts point out, is concentration. A world economy leaning heavily on one investment theme is more exposed if that theme disappoints, and the report’s title hints at the same tension between resilience and strain.

What to Watch

Three variables will decide whether the forecast holds: how much oil actually flows through the Strait of Hormuz, whether AI-related spending keeps expanding, and whether inflation cools fast enough to let policymakers ease. The next IMF update is due in January.