Key views Global Outlook 2026

Macro

Eurozone

Growth in the near term is slowing on the back of US tariffs and an unwind of US export frontloading, though the recovery in domestic demand (helped by past rate cuts) is a key offset. Next year, higher defence and German infrastructure spending are likely to drive higher quarterly growth. Disinflation is continuing, though progress in services inflation has recently stalled, despite wage growth continuing to cool. Falling energy prices are likely to drive an undershoot of the 2% inflation target later this year, helped by a stronger euro. However, core inflation is expected to hold steady around the ECB’s target.

The Netherlands

The short-term growth outlook remains subdued on the back of US tariffs and (inter)national uncertainty. Moving further into 2026, the outlook improves on the back of rising real incomes, fiscal measures, rate cuts feeding through and spillovers from German fiscal expansion. Inflation, still significantly above 2%, is expected to ease further but to stay elevated compared to the eurozone in the coming years – partly due to services prices and tax changes. After the recent snap elections, the coalition formation is expected to be an arduous and lengthy.

UK

The economy is slowing on the back of the US tariff shock. Still, the UK is less vulnerable to US tariffs than the eurozone, as it is less export dependent and faces a lower tariff rate. Lower interest rates and higher government spending are also giving some support to growth. The upcoming budget is likely to come with new tax rises, which should be enough to keep the UK sticking to its fiscal rules. Inflation remains stubbornly high, with wage growth still well above levels consistent with 2% inflation, but recent data has been slightly more encouraging.

US

The impact of tariff and immigration policy will gradually build in the data. However, any negative impact in the headline figures will be overshadowed by the positive impulse from AI investments and monetary and fiscal easing. We further upgraded our growth forecast but also foresee higher inflation and deficits. Inflation rises further due to continued pass-through of tariffs, as well as demand effects from stimulus. Unemployment continues a gradual, but not dramatic increase, as supply and demand remain mostly in balance.

China

Macro imbalances remain elevated, with supply stronger than demand, and deflationary pressures not over yet. Next year, Beijing will likely not abandon its focus on high-tech development, but we sense a bit more urgency to support the demand side as well. As the recent deal with the US reduces external risks in 2026, we still expect targeted support, and no ‘credit bazooka'. We have slightly revised our quarterly GDP growth profile, and expect a moderate pick-up in q/q growth in 1H-26. However, we still expect annual growth to slow, from 5% in 2025 to 4.6% (was 4.3%) in 2026 and 4.3% in 2027.

Central Banks & Markets

ECB

The Governing Council kept policy on hold in October, and is likely to remain on hold for the foreseeable future. President Lagarde has said that the ECB is ‘well positioned’ to face the coming period of tariff impact and uncertainty. Despite the expected undershoot of the 2% inflation target, the GC seems minded to look through this on the expectation that inflation will return to target in 2027. Near term risks are tilted to another cut given the looming inflation undershoot, but in 2027, those risks could tilt towards a hike, with upside risks likely to build from higher German fiscal spending.

Fed

The Fed has started easing rates in response to downside risk in the labour market. Despite some pushback due to a lack of data, we expect another 25 bps cut in December. In 2026, the Fed faces a further diverging economy. Consistent with its reaction in the most comparable instances, we expect the Fed to continue easing, despite rising core inflation. We expect a policy rate of 2.75-3.00% by Q3, the lower end of neutral estimates. Headline inflation will initially be more modest on the back of lower oil prices, allowing a focus on the employment mandate.

Bank of England

The MPC kept Bank Rate at 4.00% in November, in line with our expectations. Four of the nine MPC members dissented against the last rate cut in August, and Governor Bailey has become more dovish again. In light of this and despite sticky inflation, we see some risk that the next rate cut could come sooner than our base case of April. We will update our view based on the incoming data. If recent, more benign inflation indicators persist, the BoE could well already move in December.

Bond yields

With the conclusion of the ECB's rate-cutting cycle and elevated debt supply issuance next year, there is limited potential for 10y bund yield to decline. We anticipate upward pressure on long-term yields, with bond vigilantes on alert, ready to respond to signs of fiscal slippage. This is particularly relevant to the US, with one of the weakest fiscal and debt outlooks among developed countries. Current US term premium fails to compensate for it. As such, we expect US long-term rates to rise in 2026, leading to a steeper yield curve.

FX

The US dollar is substantially overvalued according to different metrics. Cyclical drivers and FX hedging have mainly contributed to dollar weakness in 2025. In our forecast horizon we expect the dollar to weaken further due to negative cyclical developments and more concerns on the structural factors. We expect the narrowing of rate spreads between the US and the eurozone to support the euro as well as higher defence spending and German infrastructure spending. Our forecast for EUR/USD end 2026 stands at 1.25.