The OECD has revised its growth forecasts for various major economies. The global GDP growth for 2025 and 2026 is now expected to be 2.9%, down from earlier projections of 3.1% and 3.0%, respectively.

The United States is projected to grow by 1.6% in 2025, down from 2.2%, and 1.5% in 2026, a slight decrease from 1.6%. The Eurozone is expected to grow by 1.0% in 2025 and 1.2% in 2026, with these figures remaining unchanged.

China and the UK

China’s growth forecast for 2025 is adjusted to 4.7%, a minor dip from 4.8%, and remains at 4.3% for 2026. The UK’s projections have also been lowered, with a forecast of 1.3% for 2025 and 1.0% for 2026.

Japan’s GDP growth is anticipated at 0.7% for 2025, reduced from 1.1%, and will see a 0.4% rise in 2026, slightly up from 0.2%. The organisation cites potential impacts from economic policies, such as tariffs, as a factor in these revised forecasts.

These adjustments from the OECD reveal not just a broad-based slowdown in expected growth, but also a recalibration of expectations tied to ongoing policy decisions and demand conditions. The numbers indicate more than just rounding errors—they suggest a mood of caution among economists, shaped by tighter credit conditions, subdued consumption, and perhaps a reassessment of global trade dynamics.

For us watching implied volatility and rate expectations, Powell’s recent data sensitivity takes on added meaning. The lower growth outlook for the US, trimmed from 2.2% to 1.6% in 2025, flags a moderation in domestic momentum, likely making rate cuts more viable than previously considered. That kind of move would reprice rates markets fast—short-end gamma picks up, and that puts a higher value on nimble positioning across the curve. In this setting, deviation from soft-landing narratives could spill quickly into rate vol.

Lagarde’s rate cycle shows up here in numbers that remain static for the euro area. While no downward revision appeared for the bloc, the ECB’s delicate act of holding inflation expectations while nudging policy looser will feed directly into yield spread trades, favouring continued compression around peripheral paper. We lean towards paying short-dated vols into key data prints while fading the more aggressive rate-cut bets unless there’s a steep drop in core metrics.

China Growth and Global Implications

Over in China, the shift from 4.8% to 4.7% is marginal—on its face. But it marks another touchpoint where the engine of global growth isn’t returning to pre-pandemic speed. That puts pressure not just on regional good producers, but on those cycling in Asia-ex-China exposure. We’re cautious on tail risk via CNH volatility skew, especially against any fresh moves around property relief or credit impulse.

Sunak’s position going into what might be a crowded race is mirrored by lower GDP projections for the UK. A trim to 1.3% in 2025 and further to 1.0% in 2026 suggests softer productivity and consumer pressure under a weak policy cushion. This creates a fertile spot for steepeners in UK rates, but with positioning not as light as some might expect, we’re watching for sharp reversals borne out of CPI surprises.

Kishida’s lower growth profile—0.7% for 2025, and just a shave up to 0.4% in 2026—draws attention to real wage stagnation and structural slack. This says less about overheating and more about fragile domestic demand. Long yen optionality gained appeal already, and demand for forward-dated skew tells us others are drawing the same conclusion. Duration demand in JGBs is no longer just a pension story—it’s starting to reflect expected policy inertia.

There’s one loud implication resonating through all of this: reactive policy cycles now drive cross-asset volatility more than macro health alone. We track the shifts not just as data revisions, but as visible handholds to recalibrate exposures. These aren’t abstract forecasts—they’re flags that sends short-dated pricing into motion. Longer-dated implieds stay relatively grounded, which invites calendar spreads. Better to trade what’s moving than intellectualise the long run.

This isn’t about one country’s numbers. It’s about reactivity and recalibrated conviction. When policymakers rethink, we adapt—not in broad-stroke, but at the level of delta hedges and conditional risk shaping. Keep that lens steady.

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