Our research

Prinsjesdag 2026: A budget in search of a majority

The Minority cabinet Jetten I presented its first full budget today at ‘Prinsjesdag’ (Budget Day). Today’s budget is yet without a majority and therefore features policies aimed at securing support from opposition parties. As a result, changes to today’s budget are expected during the upcoming budget debates. The impact on the budget deficit is expected to be limited, given tight agreement among coalition partners on budget rules… and as a result, we do not expect a significant impact on the funding need for 2027. The Dutch economy is resilient while long term challenges are mounting and inflation stays too high compared to peers.

FOMC Watch – A hike of caution, not conviction

Our base case is a 25bp hike, after the August CPI report likely shifted the narrow FOMC majority. A hike would be insurance against persistent inflation, not an attempt to reverse the energy shock. The decision does not imply that inflation expectations are unanchored, the labour market is overheating, or a long hiking cycle lies ahead. Warsh must explain both what the Fed is doing and the limits of what it can achieve.

Updating our scenario: Higher for longer

The recent escalation in the Middle East likely means higher for longer energy prices, inflation and interest rates. Energy supply through both Hormuz and the Saudi East-West pipeline is likely to remain constrained in the coming months. The higher profile for energy prices leads to an upward revision to our inflation forecasts, with a longer period of above-target rates. Economic growth remains resilient near term; will be dampened next year on higher energy prices, interest rates and slower AI capex growth. Faced with a longer period of above-target inflation, central banks are likely to move monetary policy into moderately restrictive territory. We expect 50bp of rate hikes from both the Fed and the ECB before year end, while the door could open for rate cuts by the end of next year. Bond yields are seen heading lower over our horizon as there are more hikes priced in than we expect in our new base case. Rising term premia should drive curve steepening.

FOMC Watch - Hot CPI forces Fed hike

FX Weekly - Yen surges, central banks in focus

The yen strengthened sharply as markets increased their expectations for Bank of Japan rate hikes… but higher energy prices later weighed on the currency. The euro gave back some gains as rising energy prices and US Treasury yields supported the US dollar. The ECB’s 25-basis-point hike had little impact on the euro. The Bank of England is likely to adopt a slightly more hawkish tone next week. A near-term rate hike remains unlikely, but risks are rising. The UK government is expected to use targeted tax increases to address fiscal pressures while avoiding major spending cuts. We expect EUR/GBP to rise modestly and GBP/USD to remain slightly stronger, with end-2026 forecasts unchanged at 0.86 and 1.36, respectively.

ECB Watch - ECB rate hike cycle looks far from over

Global economic forecasts as of 7 Sept 2026

Group Economics writes regularly about developments in the macro economy. Here are our latest forecasts on interest rate and currency developments, energy prices and the economic trend in developed and emerging markets.

Spotlight - US Midterms – Trump can veto, Democrats cannot

The upcoming mid-terms are of little importance for the direction of policy, merely the potential speed. Our base case is a divided congress, which implies that Trump will continue to rule by Executive order.

Spotlight - A perfect storm for food inflation?

Food inflation remained contained in recent quarters, but leading indicators suggest upward pressures are building and we expect food inflation to start rising again towards the end of 2026 and into 2027. Heat and drought records were once again broken across the EU and the US, which is expected to put upward pressure on European food price. The impact of El Niño is likely to be more mixed. Our base case sees food price rises adding 0.5pp to eurozone HICP inflation at its peak by Q3 2027.

Key Views Global Monthly August 2026

The global economy remains resilient in the face of a succession of shocks. While the energy shock is back with a vengeance, its effects are more idiosyncratic now, and much more impactful for Europe than the US. Meanwhile, a capex troika centred around AI, defence and the energy transition are continuing to drive growth, which is expected to hold roughly around trend rates in advanced economies. The global investment surge is also supporting growth in China, although imbalances there continue to fan trade tensions with the EU. Against this backdrop, inflation will remain somewhat elevated over the coming months, and this should keep central banks leaning hawkish, with the ECB expected to raise rates further in September, and a risk that the Fed has to tighten policy. Our base case sees both central banks resuming rate cuts in 2027.