BNP Paribas analysts forecast US growth at 2.9% in 2026, above potential and stronger than 2025, driven by AI-linked investment and high-income consumption. Inflation is expected at 2.7% in 2026, above target due to tariffs, with overshooting persisting to at least end-2027. After three cuts in 2025, the Fed Funds target range is projected to stay at 3.5%-3.75% through 2026.
Growth resilience and Fed rate outlook
“The US economy is expected to grow above its potential pace in 2026, with an average annual growth rate of +2.9%, a yearly improvement (+2.3% in 2025).”
“The inflation overshooting of the target is set to continue (+2.7% in 2026) due to tariffs – although the impact of these appears to be less significant than expected –until at least the end of 2027.”
“The rebalancing of risks surrounding the Fed’s dual mandate and its emphasis on the ‘employment’ component has triggered a new cycle of rate cuts.”
“The FOMC implemented three rate cuts (-75 bps cumulative) in total in 2025, and we expect the Fed Funds target range to be held steady à 3,5% – 3,75% throughout 2026.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Source: https://www.fxstreet.com/news/us-above-potential-growth-and-steady-fed-stance-bnp-paribas-202602091637
