Our research

US - The energy shock fades, the AI boom doesn’t

Investment will keep driving growth in 2027, consumers keep up as falling inflation lifts real incomes. The energy shocks will fade without second round effects, the AI build-out keeps core inflation elevated. After one last hike in December, the Fed holds through most of 2027 before easing late in the year

Global Outlook - How resilient is resilience?

In this publication we present our economic outlook for the year ahead, while also adding our forecasts for 2028 for the first time. The global economy has expanded robustly despite many shocks over the past few years. We will explain why we think the economic expansion will continue, though we could once see more divergence between the US and the rest of the world, with Europe in particular falling behind. In addition, we explore a number of risks hanging over the global economy, which could potentially challenge the global economy’s remarkable record of resilience.

Top of Mind - AI and the neutral rate: Live and let rise

Where policy rates settle in the long run, and where long-term yields trade, depends on the real neutral rate of interest, r*. AI is now putting upward pressure on it from two sides. The build-out of data centres, chips and power is the largest investment boom in decades, and the productivity gains it promises could change how fast the economy grows. This note asks what both do to r*, in the US and the euro area.

US – Strong growth, sticky inflation

FOMC Watch - Rates on hold, rate-setting meetings cut

The Fed's FOMC kept the target range for the federal funds rate at 3.75-4.00%. Hammack and Cook dissented in favour of a hike. Two other potential dissenters, Logan and Kashkari, chose not to dissent, possibly because they expect a hike in December. The committee gave no clear signal of a December hike, but kept the option open. The post-meeting statement was marginally longer than usual. It added: ‘The accumulation of more information will help the committee determine the policy stance appropriate to ensure a timely return of inflation to the committee’s 2% goal.’ This appeared to satisfy markets as an explanation for today’s inaction.

Top of Mind - AI capex boom to die another day

A troika of capex booms – AI, defence and clean energy – is set to reach USD 3.5 trillion this year across the US, Europe and China. The main growth impulse is coming from AI capex, which is growing rapidly, but signs are that the pace will slow in 2027. If AI capex is in line with guidance, the growth impulse will not fall off too much and will be more than offset by higher US defence investment. US capex will therefore remain strong but the spillovers to other economies will likely be less, while EU and China capex will slow. We do not expect an AI capex bust in the near term, but the economics do not bode well for the medium term: It will probably die another day.

FOMC Watch – Patience, not complacency

We expect the Fed to hold on Wednesday, with some risk of hawkish dissents. Inflation remains too hot, but declining breadth and a cooler labour market give the Fed room to wait. Markets have sharply reduced the probability of an October hike, and December is no longer fully priced. We still expect one final 25bp hike in December, followed by an extended hold.

US - Narrower inflation, broader hiring

The downward revision of PCE inflation exceeded expectations, and showed pressures narrowing. The labour market is solid, but not hot. Hiring is becoming less concentrated. The latest data gives no urgency for the Fed to hike, and we continue to see one last hike in December.

Global Monthly - Will the bond sell-off derail the economy?

The global economy has shrugged off repeated shocks, but rising bond yields are emerging as a new challenge to the expansion. Bond markets are mostly pricing higher neutral rates, with fiscal concerns adding to yield increases in France, Belgium and the UK. Higher rates may slow the expansion, but they are unlikely to derail the US or eurozone economies on their own. The growth impact will be bigger in fiscally vulnerable economies, with France facing the twin challenge of consolidation and bigger rate rises. Markets may be overestimating how long policy rates will stay elevated, leaving room for bond yields to fall back next year. Regional updates: Rising yields temper rate hike pace in the Eurozone. We raise our growth forecast in the Netherlands following a strong H1. In the US, narrower inflation reduces the urgency of the Fed to hike. Growth gains momentum in China helped by targeted fiscal support

US Watch - Weak job growth takes off the pressure