Slower global growth and sticky inflation squeeze household finances

The dual squeeze

Schroders has cut its global gross domestic product growth forecast for 2026 to 2.5%, down from an earlier expectation of 2.9%. The United Nations also projects global growth to slow to 2.5% this year.

While the economy decelerates, consumer prices are accelerating. Schroders estimates that recent disruptions have already added roughly one percentage point to global inflation. This combination means everyday expenses for food and manufactured goods are squeezing real incomes.

The fading buffer

Consumers are facing these rising costs with fewer resources. Schroders notes that unlike previous economic shocks, households do not generally have large savings left to absorb price increases.

This translates directly to a drop in living standards for many parts of the world. The World Bank projects that people in emerging market and developing economies will experience the weakest per capita income growth since the pandemic.

The credit trap

Normally, central banks might cut interest rates to stimulate a slowing economy, making borrowing cheaper. However, persistent inflation prevents this policy response.

In the United States, Schroders assesses that interest rate cuts are unlikely to be delivered this year. This means the cost of mortgages, car loans, and credit card debt will remain elevated, adding another layer of financial pressure on households whose incomes are already failing to keep pace with inflation.

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Source institutions：Schroders

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