London, November 23, 2025
Global inflation is declining across advanced economies and emerging markets in 2025, driven by easing price pressures and improved supply conditions, signaling a potential return to price stability and supporting an easing of monetary policy worldwide.
Global Inflation Approaches Target Levels
Recent forecasts indicate that headline inflation is trending downwards throughout most advanced economies. The euro area inflation rate is expected to reach 2.1% this year, closely aligning with the European Central Bank’s target of 2% through to 2027. Western European countries, including Sweden and the broader eurozone, are projected to see inflation fall below the 2% threshold, marking a significant normalization after a period of sustained elevated price pressures. Meanwhile, inflation among OECD countries has stabilized in the range of 4.0% to 4.2% since March 2025, with further declines anticipated as supply chains improve and demand moderates. These shifts may permit central banks to pause or reverse recent tightening measures, potentially bolstering economic growth and consumer confidence.
Core Inflation Trends Point to Reduced Price Pressures in Europe
Core inflation, which excludes volatile elements such as food and energy, is also demonstrating a gradual deceleration, heading toward the 2% mark in both the euro area and the wider European Union by the end of 2027. Wage growth pressures are diminishing as labor market conditions soften, contributing to weakening services inflation. Additional downward pressure on prices is observable in non-energy industrial goods, where competitive import markets and a strengthened euro currency are restraining inflationary momentum. The cooling of core inflation reduces the risk of entrenched inflation dynamics, such as wage-price spirals, thus increasing policymakers’ flexibility in monetary settings.
Emerging Markets Experience Broader Disinflation and Monetary Easing Prospects
In emerging markets, excluding China, consumer price inflation is expected to moderate further to approximately 5.3% in the latter half of 2025, down from 5.8% earlier in the year. Key economies like Brazil, Colombia, and Mexico are preparing for considerable monetary easing as disinflation trends become more pronounced. Weak domestic demand in many emerging market countries supports this downward inflation trend despite previous inflationary spikes. Reduced inflationary pressures in these economies contribute to enhanced financial market stability, decreased currency volatility, and create space for more accommodative fiscal and monetary policies.
Underlying Factors and Ongoing Risks
The global fall in inflation is primarily attributable to a combination of supply chain normalization, easing energy price shocks, and the cumulative effect of tighter monetary policies implemented over the past few years. While the prevailing trend toward lower inflation is broadly positive, risks persist. These include geopolitical tensions, potential trade restrictions such as tariffs, and unexpected disruptions to commodity markets. Vigilance remains necessary as these factors could affect inflation trajectories and economic stability.
The recent disinflationary trends mark a pivotal shift away from the high inflation environment seen in the post-pandemic period, suggesting that price stability could be restored across many regions by the close of 2025. This turnaround has important implications for policy frameworks, economic recovery efforts, and global financial conditions going forward.