Global inflation in early 2026: end of the crisis or the start of a new economic cycle?

More than three years after inflation surged due to the pandemic, energy shocks, and geopolitical conflicts, the global economy is entering a new phase. As of mid-2025, data from the International Monetary Fund (IMF), central banks, and market indicators show a decline in inflationary pressures, but uncertainty remains high. The key question: are we witnessing the end of the crisis or the beginning of a new cycle with different dynamics?

IMF: “Disinflation is underway, but not complete”

The IMF’s July 2025 World Economic Outlook Update reports that global inflation has declined to an average of 3.7% — the lowest since 2021. In advanced economies such as the U.S. and Eurozone, inflation is nearing central bank targets of 2%, while many emerging markets — particularly in Latin America and Asia — are still facing rates above 5%.

IMF Chief Economist Pierre-Olivier Gourinchas warns that “while interest rates are normalizing, the risk of new inflationary shocks — especially from energy or climate disruptions — remains significant.”

Central bank strategies: cautious adjustments

In spring and summer 2025, several central banks — including the European Central Bank (ECB) and the U.S. Federal Reserve — began gradually reducing interest rates. In June 2025, the ECB cut its key rate from 4% to 3.75%, while the Fed lowered its rate from 5.25% to 5%.

The Bulgarian National Bank (BNB), bound by a currency board, follows Eurozone moves closely. Inflation in Bulgaria stabilized at 3.2% in Q2 2025. BNB analysts now highlight a greater concern over stagnant investment and sluggish growth, rather than inflation itself.

Regional variations: U.S. vs Europe vs emerging markets

U.S. consumer spending remains solid, driven by a resilient labor market and rising incomes. According to the U.S. Department of Commerce, household consumption grew by 1.6% in H1 2025, despite high real estate prices.

Europe presents a more mixed picture. Germany and France show modest growth, while Southern nations like Italy, Spain, and Greece are feeling the lag from previous ECB tightening. Consumption and business investment remain weak.

Emerging economies are facing currency instability, trade imbalances, and mounting debt. According to a June 2025 World Bank report, 40% of low- and middle-income countries are at risk of debt distress.

Consumer sentiment: frugality returns

A Nielsen IQ survey from May 2025 finds that consumers in both the EU and North America remain cautious. 62% of respondents say they plan to reduce spending in H2 2025 — especially on non-essentials and leisure.

In Bulgaria, the trend is similar. National statistics show 55% of households report “price pressure” on their budgets, even though official inflation is below 4%.

Risks on the horizon

Experts warn that energy shocks, geopolitical tensions in the Middle East, and climate events could trigger fresh inflationary waves. Rising insurance, logistics, and commodity costs tied to natural disasters are already impacting global supply chains.

Conclusion: inflation slows, uncertainty lingers

2026 begins with cautious optimism — inflation is under control, and central banks are adapting. But risks remain. Consumers are still wary, businesses are hesitant, and governments face the dual challenge of fiscal discipline and reform. The next 6–9 months will be crucial in determining whether the global economy returns to stability or enters a new, unpredictable cycle.

Disclaimer:
This article is an analytical review by the BurgasMedia editorial board and reflects the opinion of an expert group based on current political, economic, and social developments.
The conclusions presented are not predictions or factual statements, but a hypothetical interpretation of possible scenarios.
The publication is not responsible for any discrepancies with future developments and encourages readers to form independent judgments based on verified sources.