The latest macroeconomic outlook for 2025-2026 suggests ongoing uncertainty in the global environment, with economic growth patterns diverging across regions. The report highlights that, despite persistent anxieties, there is hope that volatility from US economic policy will decrease and that tariffs will stabilize.
In the United States, the first half of 2025 saw significant volatility in both sentiment and growth. Investors shifted their outlook after a period of optimism, particularly following the so-called ‘Liberation Day’. Economic activity was affected by a surge in imports in anticipation of new tariffs, which later dropped sharply. As a result, GDP contracted by 0.6% in the first quarter but rebounded to 3.8% growth in the second quarter.
The outlook for the US remains largely unchanged, based on anticipated policy decisions from the Trump administration. The scenario expects a slowdown in 2025 due to higher tariffs, stricter immigration policy, and inflation, followed by a mild rebound in 2026 supported by legislative measures and deregulation. The forecast projects average annual growth of 1.7% in 2025, down from 2.8% in 2024, before accelerating to 2% in 2026. The labor market is expected to weaken, with job creation slowing and unemployment possibly peaking at around 4.5% by year-end.
Inflation remains a concern, with tariffs potentially adding nearly 0.8 percentage points to prices over one year. Headline and core inflation could reach about 3.2% by the end of 2025 and remain above the Federal Reserve’s 2% target through 2026. The report states: "It is therefore bold to assume that the Fed will neglect the inflation component of its mandate in favour of the employment component alone."
In the Eurozone, recovery continues despite weak consumption and a challenging external environment. Growth was strong in early 2025 due to a rebound in exports but cooled later in the year. GDP is expected to grow by 1.3% in both 2025 and 2026. Investment has been resilient, supported by European funds, defense spending, and Germany’s recovery plan. The recently concluded Turnberry trade agreement between the EU and US is projected to have a marginally negative effect on growth, reducing it by 0.1 percentage points in 2026 compared to previous forecasts.
Emerging economies have shown resilience despite pressures that could have weakened them. These countries benefit from reduced demand for the US dollar, which has eased pressure on their currencies and interest rates. Growth in emerging markets is projected to average 3.9% in both 2025 and 2026. However, these economies remain vulnerable to potential market shocks and must adapt to changing global competition as well as developments in China.
China continues to face weak consumption, a sluggish real estate sector, and overcapacity in key industries. These factors contribute to deflationary pressures; producer prices are expected to fall by 2.6% in 2025. Inflation is forecasted at just 0.1% in 2025, rising slightly to 0.6% in 2026. Economic growth is predicted to slow from 5% in 2024 to 4.8% in 2025 and 4.4% in 2026.
On monetary policy, the report indicates that central banks are unlikely to ease significantly. In the US, only one more rate cut is anticipated before the Federal Reserve pauses through 2026, keeping the upper bound of its target range at 4%. The European Central Bank is expected to hold rates steady after recent cuts before considering any increase late in 2026 if economic conditions warrant it.
Interest rates are forecasted to experience moderate upward pressure due to inflation concerns and less monetary easing than previously hoped. In the US, two-year Treasury yields could reach 3.7% by end-2025; ten-year yields may hit 4.3%, while thirty-year yields are expected to remain below 5%. The German ten-year Bund yield could rise to 2.8%, with spreads widening for Spain, France, and Italy.
The US dollar weakened following ‘Liberation Day’ events and expectations of monetary easing but could recover if capital inflows remain steady and easing is less than anticipated. The euro-dollar exchange rate is projected near recent highs (1.17) at end-2025 before declining toward 1.10 by end-2026.
"To learn more, consult our publication World – Macro-economic scenario 2025-2026 – Hoping for a hint of stability..."