In the US, with average annual growth close to 1.9% in 2025, growth has held up well despite uncertainty – uncertainty that is omnipresent and sometimes very burdensome. Growth, which has been volatile due to net exports and inventories disrupted by the effects of Donald Trump’s trade policy, is down sharply from the very strong pace of 2.8% in 2024. However, it has defied the recession forecasts that some feared in the aftermath of the tariff announcements on “Liberation Day” on 2 April.

Our scenario now envisages a slight acceleration to 2.1% in 2026, justified by a context of supposedly more favourable political and economic decisions. These refer to the second phase of the Trump administration’s measures, in line with the pace outlined in our scenario at the end of 2024: measures detrimental to short-term growth taken quickly, as they fall within the president's prerogatives, followed by fiscal support. In 2026, fiscal policy should thus begin to take effect, and uncertainty, particularly on the trade front, should fade, albeit without disappearing. Economic fundamentals should remain sound: (1) lower sensitivity to interest rates; (2) an overall robust household financial situation despite pockets of weakness concentrated among low-income households and small businesses; (3) clear signs of a slowdown in the labour market, without however causing a significant rise in the unemployment rate due to the decline in net immigration, which will ultimately weigh on growth; and (4) continued investment in AI at a less frenetic pace, but pointing to another strong year for non-residential investment. On the other hand, economic policy, particularly tariffs, will continue to fuel inflationary pressures. Headline inflation is expected to reach 2.7% and core inflation nearly 2.8% by the end of 2026, before both indices trend towards 2.3-2.4% by the end of 2027. Inflation is expected to remain above the 2% target until the end of our forecast horizon.

In the Eurozone, resilient domestic demand has helped to weather an adverse environment, and growth, benefiting from a comfortable carry-over at the end of Q3, could reach 1.4% in 2025. In 2026, the good financial health of private agents, still favourable financial conditions and a slightly expansionary fiscal policy should help absorb the confidence shock linked to the trade war and geopolitical uncertainty. Our scenario therefore stays its course: growth in line with its potential, supported by accelerated investment, particularly public investment, with a significant contribution from the German spending plan. 

Growth could thus be around 1.2% in 2026 and 1.3% in 2027: a resilience that is nevertheless tempered by some caveats. Increased competition from Asian products on global and domestic markets is hampering the competitiveness of European companies. Risks are therefore skewed to the downside and require vigilance, particularly regarding sector developments. Slowdowns in certain sectors can spread sequentially: while they may not immediately turn into a widespread ‘depression’, over time they can lead to a broad economic slowdown. Finally, despite headline and core inflation rates both expected to be around 1.8% at the end of 2026 and 2027, ie, below the 2.0% target, the pace of growth would encourage the ECB to maintain the status quo until spring 2027. 

In major emerging economies, our scenario remains fairly positive. The slowdown in exports should be limited and growth is unlikely to slow significantly. Its composition could prove more balanced, with limited moderation in private consumption, while investment and consumer spending could gain momentum thanks to lower interest rates and clarification of US customs policy. Our scenario forecasts GDP growth of 4.0% in 2026, after 4.2% in 2025: economic acceleration in the Europe-Middle East-Africa region is offset by a slight slowdown in Latin America and Asia, which would nevertheless continue to post the strongest performance, thanks to Chinese growth forecast to be just below the 5% target.

On the monetary front, diverse progresses in terms of disinflation and proximity to central bank targets justify different approaches. The US Federal Reserve, whose further easing, is made difficult by more persistent inflation, differs in particular from the ECB, which is in a more comfortable position due to inflation foreseen to be slightly below its target. After key interest rates remain stable in 2026, there would be modest movements in 2027: downward in the US and upward in the Eurozone.

More specifically, in the US, our scenario of persistent inflation with a contained slowdown in the labour market justifies continuing to favour the Fed's “hard line” option. The Fed is likely to pause until the end of 2026, keeping the upper limit of the Fed Funds rate at 3.75%, before proceeding with a single 25bp cut in Q227. This outlook remains more cautious than that of the market, which, continuing its trend of excessive optimism, is forecasting a rate slightly above 3.00% towards the end of 2026. Nevertheless, it must be acknowledged that the risks surrounding our scenario are rather skewed to the downside, particularly with political pressures and the imminent arrival of a new Fed chair.

In the Eurozone, the anticipated resilience of growth should encourage the ECB not to further ease its monetary policy in 2026. Inflation, and in particular core inflation, should continue to decline, falling below the 2.0% target at the end of 2026 and reaching its lowest point at the beginning of 2027. However, in 2027, driven mainly by the German recovery plan, stronger growth could put some pressure on the labour market and wages, which could eventually lead to inflationary pressures. The ECB could anticipate this expected rebound in inflation and begin to tighten its monetary policy as early as the beginning of 2027. The stability of key interest rates expected in 2026 would be followed by two rate hikes (March and September 2027), bringing the deposit rate to 2.50%. 

In both the US and the Eurozone, interest rates are expected to be subject to moderate upward pressure in 2026, driven by decent growth rates and fiscal stimulus. However, the divergent monetary policy movements anticipated for 2027 justify different deformations in the interest rate curves: steepening in the US and flattening in the Eurozone.

While the market is expecting the Fed to ease the Fed Funds rate by nearly 50bp in 2026, the Fed's latest dot plot indicates a 25bp cut and a median rate of 3.00% in the long run. In light of these forecasts, the pause in monetary easing assumed in our scenario for 2026 argues in favour of a slight rise in the 2Y yield, whose recent decline reflects the market's somewhat overly optimistic expectations of monetary easing. Our scenario assumes a 2Y Treasury yield of around 3.70% at end-2026. Driven by slightly stronger growth in 2026 and continued high public financing needs, our scenario assumes a 10Y yield of 4.50% at end-2026. In 2026, after flattening slightly in H1, the curve would steepen in H2; in 2027, interest rates would fall.

In the Eurozone, after a pause in 2026, the ECB could undertake a somewhat slight monetary tightening in 2027. Such a scenario should result in a rise in interest rates coupled with a flattening of the curve. For 2026, our scenario (swap rate) thus assumes a rise of nearly 30bp in the 2Y yield, bringing it to nearly 2.50% and the 10Y yield rising to 2.90% at the end of the year. The increase in German debt supply, reflecting fiscal expansion, will lead to a slight recovery in 10Y yield, with the Bund ending the year at 3.00%. This tightening of monetary and financial conditions would be less favourable to riskier issuers, whether they are longstanding issuers from the periphery or have recently joined it.

Finally, in 2026, yield spreads should favour the USD, while it is unlikely that the EUR will be able to benefit from speculation about the US currency's status as a reserve currency. The dollar is expected to depreciate in 2027 because of new monetary policies favourable to the euro.