No Recession, Just Stagnation: IMF's 2026 Global Forecast

The National Bank of Poland's latest statement signals a readiness for further monetary easing, despite a temporary pause in rate cuts.

The Polish Monetary Policy Council (MPC) has adopted a dovish tone in its latest statement, signaling a clear readiness for further monetary easing despite holding interest rates steady for now.

Policymakers noted that incoming data suggests a potential drop in CPI inflation during the first quarter, with stabilization expected around the National Bank of Poland's (NBP) target level in the following quarters. The MPC also downplayed a recent jump in wage growth, suggesting the council views the uptick as temporary after a year of slowing growth. This interpretation points to a clear bias toward future rate cuts.

Strong Economic Data Justifies a Wait-and-See Approach

The decision to pause comes just three weeks after the MPC's January meeting, with no new official inflation data released in the interim. During this period, however, real economy data came in stronger than anticipated.

Key upside surprises included:

• Industrial and construction output: Growth in December was significantly stronger than market expectations.

• GDP growth: Preliminary estimates for 2025 suggest the economy expanded at a pace close to 4% year-on-year in the fourth quarter.

• Wage growth: December data also beat forecasts, interrupting a downward trend, though this was largely driven by annual bonuses in sectors like mining.

In light of this stronger data, the MPC has adopted a wait-and-see mode. The council requires more time to confirm that the declines in CPI inflation, core inflation, and wage growth are permanent trends.

The Case for Resuming Cuts: Favorable Inflation Outlook

Despite the pause, there appears to be substantial room for further interest rate reductions. The inflation outlook remains favorable, with forecasts indicating that inflation has likely already fallen below 2% year-on-year at the start of 2026.

Inflation is expected to remain below the NBP's target for almost the entire year, averaging 2.1% YoY. In some months of 2026, it could decline to around 1.5%, which is the lower bound of the tolerance range from the 2.5% target. This disinflationary pressure is supported by expectations of continued slowing wage growth, rising imports of inexpensive goods from China, and favorable developments in the food market.

Rate Forecast: A Path to 3.25% by Year-End

The reference rate is projected to be cut from its current 4.00% to 3.25% before the end of 2026. Further rate reductions are expected to resume soon.

March is seen as a suitable moment for the next cut. By then, the MPC will have access to the preliminary inflation reading for January and an updated macroeconomic projection. This new information should reinforce policymakers' confidence that the current disinflation is durable, creating space for further monetary easing, albeit on a smaller scale than in 2025.

Mark Rutte, NATO's new Secretary-General, is an experienced and energetic politician. As the longest-serving prime minister in Dutch history, his political instincts would have been a perfect fit for the job in a previous era. But in today's geopolitical landscape, his worldview and approach are precisely what NATO does not need.

Rutte's Bet: Keeping America First in NATO

Since taking the helm, Rutte's primary goal has been clear: keep the United States unconditionally committed to European security. To achieve this, he appears willing to flatter U.S. President Donald Trump and discourage European efforts toward greater strategic autonomy. While the motive is understandable—relying on the U.S. as a first responder is a comfortable arrangement—his assessment of the strategic situation is deeply flawed.

Rutte recently told the European Parliament that Europe simply cannot defend itself without significant U.S. assistance, dismissing any alternative as a "dream." This statement serves as a direct rebuttal to Canadian Prime Minister Mark Carney's widely praised Davos speech, which called for medium powers to unite against the predatory behavior of great powers—a group that now includes the United States.

While Carney avoided naming Trump, his audience understood the message. Rutte, however, is doubling down on a policy of dependence, seemingly convinced that NATO allies have no choice but to follow the United States, no matter how erratic its leadership becomes.

Four Flaws in the Dependency Doctrine

This conclusion is built on at least four serious miscalculations that undermine European security and the future of the alliance.

1. Europe Can Defend Itself

First, Rutte is fundamentally wrong about Europe's defense capabilities. While the continent is currently over-reliant on the United States, this is a solvable problem, not a permanent state of weakness. European nations do not need to match America's global power projection. They simply need the capacity to deter or defeat an attack on their own territory.

The only significant military threat to Europe comes from Russia, which is not in a strong position itself. Consider the raw numbers:

• NATO's European members have a combined population more than three times that of Russia.

• Their collective GDP is nearly ten times larger.

• They already outspend Russia on defense annually.

The problem isn't a lack of resources but inefficient spending and coordination. Combined with the defensive advantages offered by modern technologies like drone warfare, a robust European defense independent of heavy U.S. support is well within reach, a point made by numerous defense analysts.

2. Appeasing Trump Is a Failed Tactic

Second, the strategy of appeasement isn't working. Rutte has gone to great lengths to flatter Trump, once even comparing him to a "daddy." The return on this effort has been minimal.

The Trump administration's National Security Strategy portrayed Europe as a collection of decadent nations in decline. Furthermore, Washington renewed its push to take over Greenland. History has repeatedly shown the dangers of appeasement, and Trump's actions demonstrate that the tactic often fails to produce the desired results.

3. Weakness Only Invites Contempt

Third, constantly highlighting European weakness and dependence reinforces the MAGA movement's contempt for democratic allies. This narrative paints them as strategic burdens, fueling arguments for abandoning the alliance altogether.

Trump respects strength and exploits weakness. A more capable Europe would be a more valuable partner, better positioned to push back against dangerous U.S. policies. By insisting on a position of compliance, Rutte is inadvertently making Europe an easier target for an administration that bullies the weak and backs down only when faced with resolve.

4. The Secretary-General's Role Has Changed

Finally, the job of the NATO Secretary-General has evolved. In the past, the role centered on managing American preferences. Today, it requires preparing the alliance for a future where the United States is less central or potentially even absent.

Instead of working to overcome the collective action problems that hinder European defense, Rutte's approach reinforces them. He is trying to preserve an outdated status quo at a time when the alliance needs to adapt urgently.

A New Global Reality Demands a New NATO

Mark Rutte has not yet grasped the structural shifts in global politics. During the Cold War, U.S. support for Europe was guaranteed by the shared goal of containing the Soviet Union. In the unipolar moment that followed, the risk of war seemed low, and Washington was willing to handle the heavy lifting.

That world is gone. The Trump administration has no commitment to liberal values and treats both allies and adversaries with a transactional, predatory approach. China has emerged as a major economic and military power, pulling U.S. attention away from Europe. In this new multipolar world, Europe is no longer Washington's primary focus and must learn to chart its own course.

The Path Forward: A Rebalanced Alliance

Preserving NATO's old formula of U.S. dominance and European submission is an increasingly risky bet. The safest path forward is a new division of labor within the alliance.

European members must build up their defense capabilities as quickly as possible. The United States should transition from being Europe's "first responder" to its "ally of last resort." This shift won't happen overnight, but a more unified and capable Europe would command more respect from Washington and be better prepared for a future where it may have to stand on its own. Doubling down on an erratic and increasingly hostile United States is the last thing NATO should be doing right now.

A popular theory claims Donald Trump’s foreign policy is built on a simple premise: carve up the world into "spheres of influence" with autocratic rivals. Pundits and social media influencers circulate maps dividing the globe between Trump, China’s Xi Jinping, and Russia’s Vladimir Putin.

Headlines warn of this new world order, suggesting a grand bargain is in the works. But a closer look at the evidence reveals a different strategy entirely.

While Trump is fiercely protective of American dominance in the Western Hemisphere, he shows no interest in granting similar power to his main competitors. His approach looks less like a global carve-up and more like a traditional U.S. strategy: secure the homeland's neighborhood while preventing adversaries from dominating key geopolitical regions.

Defining the Debate: Spheres of Influence

The term "spheres of influence" carries heavy baggage. Historically, it was a pragmatic way to manage great power rivalries. After World War II, for example, Washington and Moscow tacitly accepted each other's control over their respective parts of Europe to maintain a tense peace during the Cold War.

Today, the concept is viewed negatively. In a modern liberal system, smaller nations are expected to choose their own alliances and policies without coercion from powerful neighbors. Granting Russia a sphere of influence over Eastern Europe or China one over East Asia would mean consigning nations like Lithuania or Taiwan to subjugation.

When critics accuse Trump of pursuing this model, it’s an accusation, not a neutral observation. But the facts don't support the charge.

The "Donroe Doctrine": America's Backyard First

To be clear, Trump is unambiguous about one region: the Americas. His administration has explicitly called for restoring U.S. "dominance" in the Western Hemisphere, a policy some have dubbed the "Donroe Doctrine."

This isn't just rhetoric. His administration has actively worked to:

• Eject Chinese companies from operating ports in the Panama Canal.

• Seek the removal of President Nicolás Maduro in Venezuela.

• Apply pressure on the Communist regime in Cuba.

Trump's desire for an American sphere of influence is clear. The real question is whether he is willing to grant the same privilege to Russia and China in Eurasia. The evidence says no.

Confronting Putin: Why Trump Isn't Ceding Europe

If Trump truly intended to grant Vladimir Putin a sphere of influence, the playbook would be straightforward. He would withdraw the U.S. from NATO, cut off military aid to Ukraine, and negotiate a peace deal that effectively hands Kyiv to Moscow.

Instead, his administration has done the opposite:

• Strengthened NATO: He has aggressively pushed allies to increase defense spending to as high as 5% of GDP.

• Armed Ukraine: He has provided weapons to Ukraine (with Europe footing the bill) and approved their use on Russian territory.

• Sanctioned Russia: He has ramped up economic pressure on Russia's critical energy sector.

This strategy is far more consistent with containing Putin and preventing a hostile power from dominating a critical region—a core tenet of long-standing U.S. policy.

Containing Xi: The Real U.S. Strategy in Asia

The same pattern holds true in East Asia. A genuine plan to concede the region to Xi Jinping would involve cutting off arms to Taiwan, downgrading diplomatic relations, and weakening U.S. alliances with regional partners.

Again, Trump's actions point in the opposite direction:

• Prioritizing the Indo-Pacific: The National Defense Strategy identifies deterring conflict in the region—a clear euphemism for containing China—as the second-highest priority after defending the homeland.

• Boosting Military Spending: The administration passed the largest U.S. defense budget in history, focusing on capabilities designed for a potential conflict with China.

• Supporting Taiwan: Trump approved the largest arms package to Taiwan in history and the State Department dropped language opposing Taiwanese independence.

• Pressuring Allies: As in Europe, the administration is urging Asian allies to spend more on their own defense.

If this is a plan to grant China a sphere of influence, Xi Jinping is likely both perplexed and displeased. Elsewhere, from bombing Iran's nuclear program to amassing a naval armada in the Middle East, the policy is one of containment, not concession.

A Pragmatic Power Play, Not a Global Carve-Up

Some argue that Trump’s assertiveness in the Western Hemisphere gives a "permission slip" for Putin and Xi to do the same. This misunderstands geopolitics. Putin has already invaded his neighbors, and Xi considers Taiwan part of China; neither is waiting for an excuse. Precedent matters in a courtroom, not in the raw calculus of international security.

While Trump may not be as hard-line as some critics wish—he might seek a trade deal with China or avoid pursuing Putin for war crimes—these nuances are not evidence of a plan to cede entire regions to dictators.

Ultimately, Trump is not an international relations theorist remaking the global order. He is a pragmatist pursuing American self-interest. That pursuit is leading his administration down a well-worn path: ejecting hostile powers from the Americas while working to contain them in their own regions. This has been a central pillar of American grand strategy for decades.

Russia's government oil revenues crashed to their lowest level in over five years in January, as a combination of weaker global prices, steepening discounts for its crude, and a stronger ruble hammered the national budget.

According to finance ministry data, oil-related tax revenues were slashed in half to 281.7 billion rubles ($3.7 billion) compared to the previous year. When combined with gas, total energy revenue also fell by 50% to 393.3 billion rubles.

This sharp decline in proceeds from oil and gas—which together account for roughly a quarter of the budget—intensifies the financial strain on the Kremlin as the war in Ukraine approaches its fifth year. The January oil revenue figure marks the lowest point since June 2020.

The Double Squeeze of Prices and Sanctions

While global Brent oil futures were down 15% year-on-year for the fiscal period, the market downturn was far more severe for Russia due to US sanctions.

The nation's flagship Urals grade traded at a discount of about $26 per barrel below the Dated Brent benchmark at its export point. This is a dramatic widening from the discount of just over $12 a barrel seen a year earlier, according to data from Argus Media.

These discounts expanded significantly after the US blacklisted Russia's two largest producers, Rosneft PJSC and Lukoil PJSC, in October. Further pressure could be on the horizon, as US President Donald Trump announced plans to cut import tariffs for India—a major buyer of Russian crude—if New Delhi stops purchasing oil from Moscow. The practical extent of India's cutbacks remains to be seen.

A Budget Under Mounting Pressure

The revenue collapse starkly contrasts with the government's fiscal planning. Russia's finance ministry based its January revenue calculations on an average Urals price of $39.18 per barrel in December, which was a 38% drop from a year earlier. This price is far below the government's own budget forecast, which anticipated an average crude price of $59 per barrel in 2026.

According to Sergey Vakulenko, a senior fellow at the Carnegie Endowment for International Peace and a former Russian oil executive, the government’s take is highly sensitive to price. He estimates that Russia's budget receives 57 cents from every dollar of the oil price above $13.60 a barrel.

Based on this model, the government received only about $14.50 per barrel in taxes last month. Meanwhile, oil companies kept around $24.70, with an estimated $14-$18 of that going toward the costs of pumping crude and delivering it for export.

The Unexpected Challenge of a Stronger Ruble

Adding to the fiscal pain is the appreciation of the Russian ruble. In December, the currency averaged 78.4368 rubles to the dollar, making it nearly 25% stronger than it was a year ago.

"What really hurts both the companies and the government is the exchange rate," explained Vakulenko, noting that their expenses are primarily denominated in rubles and are tied to domestic inflation. A stronger ruble means dollar-denominated oil revenues convert into fewer rubles, squeezing budgets further.

However, there was one minor positive side effect from the market dynamics. The lower global prices for crude and oil products allowed the Russian government to significantly reduce the subsidies it pays to domestic refiners. In January, these subsidy payments fell by almost 90% year-on-year to just 16.9 billion rubles, the lowest outlay since payments were paused in October 2023.

The European Union is advancing a plan to build a strategic stockpile of critical raw materials, with France, Germany, and Italy slated to spearhead the effort. This move is designed to slash the bloc's heavy reliance on China for resources essential to its industrial and defense sectors.

The initiative, known as RESourceEU, was introduced in December to create a joint reserve of key materials and manage the export of reusable metal scrap and rare earth waste. While the European Commission has not yet released full details, the plan is a direct response to growing supply chain vulnerabilities.

Why Europe Needs a Strategic Minerals Reserve

China's position as the world's top producer of industrial metals gives it significant leverage over global supply chains. Since 2023, Beijing's export controls on materials such as gallium, germanium, tungsten, and heavy rare earths like dysprosium have created significant disruptions for manufacturers outside the country.

With limited domestic refining capacity and long timelines required to develop new supply sources, Europe sees a strategic stockpile as a critical buffer. Such a reserve is considered one of the few immediate tools available to:

• Protect the European economy from sudden supply shocks.

• Safeguard production for its defense and aerospace industries.

• Secure the raw materials needed for its green and digital transitions.

EU's Stockpiling Plan: France, Germany, and Italy Take the Lead

Sources familiar with the matter confirm that concrete roles are being defined for the EU's largest economies. Following a December meeting with EU officials, an agreement was reached for a clear division of labor:

• France will manage the financing for purchasing the minerals.

• Germany will be responsible for sourcing the materials from producers.

• Italy will oversee the logistics and storage of the stockpile.

This collaboration builds on an existing pledge between Italy and Germany to work together on securing vital raw material supply chains for their industries.

Progress and Hurdles in Building the Stockpile

A European Commission spokesperson confirmed that a pilot project is underway with 10 member states. "The European Commission is working closely with several member states on a pilot project to strengthen the EU's stockpiling of critical raw materials," the spokesperson stated.

These countries have been organized into working groups to assess the required mineral volumes, logistical frameworks, and financing needed to cover long-term costs. The December meeting specifically discussed potential storage facilities, including those operated by Italy-based Pacorini Global Services and Netherlands-based C. Steinweg. Both companies declined to comment.

However, not everyone is satisfied with the pace. One source expressed frustration over slow progress, noting that while there are many working groups and discussions, concrete action is lacking. Details on which banks France is consulting or which producers Germany has approached have not been made public.

An Italian source confirmed the country was in "coordination talks with the Commission, and, at a technical level, with other member states, including Germany and France."

Beyond Stockpiling: Diversifying Global Supply Chains

The EU's strategy extends beyond creating a reserve. The bloc has identified 34 critical raw materials, designating 17 of them as "Strategic" due to their importance for green technology, digital infrastructure, defense, and aerospace.

To reduce its long-term dependency, the EU is also actively pursuing international partnerships. In October, Commission President Ursula von der Leyen announced plans to accelerate raw materials agreements with countries including Australia, Canada, Chile, Greenland, Kazakhstan, Uzbekistan, and Ukraine.

European Union lawmakers are restarting work on a trade deal with the United States after halting the process in protest of President Donald Trump’s comments about acquiring Greenland and his related threats of new tariffs.

The European Parliament's trade committee is now set to resume its efforts to implement the agreement, which aims to lower many EU import duties on American goods.

Why the Trade Deal Was Paused

The deal, originally struck with Trump in July, also includes maintaining zero duties on U.S. lobsters, a provision agreed upon in 2020. However, a key vote was suspended last month after Trump threatened new tariffs against European countries that opposed his goal of annexing Greenland, a semi-autonomous territory of Denmark.

The tariff threat was withdrawn after several days, but the pause in negotiations highlighted the tense political backdrop. A significant delay from the European side could have provoked a reaction from the U.S. president, who recently threatened to raise tariffs on South Korean exports over what he described as a failure to implement its side of a trade agreement.

New Safeguards and Next Steps

Work on the trade deal will now resume, with the committee potentially voting on February 24, according to Social Democrat lawmaker Bernd Lange, who chairs the trade committee.

To protect against future volatility, Lange confirmed that EU lawmakers would support new conditions to the agreement, including:

• A Suspension Clause: This would allow the EU to suspend the deal if the United States threatens the security or territorial integrity of any member state. It would also apply in the case of new U.S. tariff threats.

• A Sunset Clause: Lawmakers also agreed to add a clause that would set an expiration date for the deal, although the exact time frame has not yet been determined.

Following the committee vote, the proposals must be approved by the full European Parliament and EU governments. This process involves negotiating a common text, which means final approval is likely still one to two months away.

Lingering Concerns Over a 'Lopsided' Agreement

Even before the recent political friction, many EU lawmakers had expressed concerns that the trade deal was unbalanced. Critics point out that the agreement requires the EU to cut most of its import duties while the U.S. largely maintains a broad tariff rate of 15%. Despite these reservations, lawmakers had previously appeared willing to accept the deal with certain conditions attached.