Our Thoughts on the US Economy

The outlook for the U S economy in 2026 is for GDP growth above 2%, making it the strongest of the major advanced economies. A large part of the growth will be driven by significant investment in artificial intelligence (AI). In the first half of 2025, private sector investment in IT equipment contributed almost half the growth in GDP. Already-announced plans by the largest IT companies strongly suggest this large contribution will continue in 2026.

Headline and core inflation were both 3.0% year-on-year in September. Tariffs have contributed to a small increase in goods prices but their impact on the overall outlook remains limited so far. It is the persistence of services and housing inflation which continue to be the main obstacle to achieving the 2% target inflation rate.

The Federal Reserve is expected to continue its path of gradual monetary easing.

Policy rates are already close to what is considered the “neutral” rate – the level that neither stimulates nor restrains economic growth. Therefore, interest rates are likely to reach their lowest in the first half of 2026, after which further cuts are unlikely.

The U.S. will likely continue to run large budget deficits, a trend that is expected to persist for several years. While short-term fiscal measures like business investment incentives and household tax breaks will support growth, the high public debt burden is a medium-term risk. 

Ongoing trade tensions, particularly with China, and the impact of existing and potential new tariffs will continue to shape global trade flows.

The political environment, including potential changes in Fed leadership and the outcomes of the November 2026 mid-term elections, presents a key source of uncertainty.