Warnings and Winners From the IMF Meetings

April 21, 2026

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IMF Meetings: Growth Risks, Central Bank Caution, and EM Resilience

The IMF Spring Meetings in Washington this April unfolded against a backdrop that was, as Morgan Stanley's Simon Waiver put it, "a bit more complicated" than usual. Investors and policymakers gathered to weigh the economic fallout from the Iran conflict, persistent inflation pressures, and rising concerns about global debt and fiscal sustainability. The conversations revealed a striking disconnect between market sentiment and underlying risks—and pointed to some clear winners and vulnerabilities across emerging markets.

The Underappreciated Growth Hit from the Iran Conflict

Seth Carpenter, Morgan Stanley's Global Chief Economist, came away from his meetings convinced that the growth impact of the Iran conflict is "underpriced and not just by markets." He found that both investors and policymakers were "underappreciating how much of a hit to growth this could be." The transmission channels differ by region. In the US, the primary mechanism is higher energy and gasoline prices squeezing discretionary income, especially for the middle and lower ends of what Carpenter called the "K-shaped economy"—the bottom half that is "already struggling." In Asia, rationing for production and public transportation is already crimping household and business spending. Europe, meanwhile, is still adapting from the energy p

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What you'll learn

1 (00:00) **Episode Introduction & Context** - Simon Waiver and Seth Carpenter introduce the episode’s focus: key investor takeaways from the IMF Spring Meetings in Washington, DC, against a backdrop of Iran conflict, persistent inflation, and fiscal sustainability concerns.
2 (00:57) **Iran Conflict’s Impact on Global Growth** - Seth Carpenter argues the growth risk from the Iran conflict is underpriced by both markets and policymakers.
3 (02:31) **Central Bank Risk: Over-Tightening vs. Being Behind the Curve** - Carpenter assesses the greater risk for central banks is over-tightening, not being behind on inflation.
4 (03:43) **Shift in Emerging Market Engagement and Sentiment** - Simon Waiver highlights the biggest focus from the meetings: a disconnect between positive market sentiment and actual developments in the Iran conflict.
5 (05:29) **Positive Outlook for EM Assets Assuming De-escalation** - Waiver states the year should be good for EM assets if the trajectory remains one of de-escalation, extending to FX where markets may quickly return to trading US dollar weakness.
6 (06:15) **Latam as a Key Winner** - Waiver identifies Latam as a key winner, a call held since the start of the year, reinforced by the Iran conflict and IMF discussions.
7 (07:36) **Key Vulnerabilities Outside Latam** - Waiver identifies energy exposure and vulnerability to the conflict as key risks outside Latam.

+ Full timestamped outline available in the app

Show Notes

Back from the IMF Spring Meetings in Washington, Simon Waever and Seth Carpenter unpack what policy makers and investors could be underpricing: the growth hit from higher energy costs, the risk of too much tightening by central banks and why emerging markets still look resilient.

Read more insights from Morgan Stanley.

----- Transcript -----

Simon Waever: Welcome to Thoughts on the Market. I'm Simon Waever, Morgan Stanley's Global Head of Emerging Markets Sovereign Credit and LatAm Fixed Income Strategy.

Seth Carpenter: And I'm Seth Carpenter, Global Chief Economist and Head of Macro Research.

Simon Waever: Today: The key takeaways for investors from the International Monetary Fund spring meetings in Washington, D.C.

It’s Tuesday, April 21st at 10am in New York.

Every six months, the IMF meetings in D.C. bring policy makers and investors together to take stock of the global economy. And we were both there as part of our IMF policy pulse conference.

This time, continuing a pattern of recent years, the backdrop was a bit more complicated. Investors are weighing the economic fallout from the Iran conflict, potentially more persistent inflation pressures, and, as always, rising concerns around global debt and fiscal sustainability. So, the key question coming out of Washington is how do these risks reshape the outlook, and what should investors be paying attention to now.

Let's start with the growth outlook, Seth. When you think about the Iran conflict, what's the single biggest channel through which it could hit global growth? And is that risk underpriced by markets today?

Seth Carpenter: I think it really is underpriced, and not just by markets. I would say I had conversations with investors, but also with policy makers down in Washington. And I would say relative to my views on things, both markets and policy makers are under appreciating how much of a hit to growth this could be. Where is it going to happen? What's the channel?

Well, that actually – that differs depending on which economy that you're looking at. I would say here in the U.S., it's primarily the middle- and lower-end of the income distribution. Higher energy prices, gasoline prices going up, taking away at discretionary income, especially in what we've been calling this K-shaped economy where the bottom half is already struggling. So, a bit of a hit primarily to consumption spending.

I'd say in other parts of the world, it's broader. Asia – we are already starting to see rationing being imposed for production, for public transportation in lots of ways that really are going to crimp spending both by households and businesses. And then of course Europe. Well, they're still in some ways reel