UNITED STATES
The US economy is expected to grow above its potential in 2026, with an average annual growth rate of 2.2%, close to the 2025 rate (2.1%). This apparent resilience to energy, uncertainty and tariff and energy shocks, together with above-trend productivity growth, masks K-shaped growth, driven by investment linked to AI-optimism and consumption by the wealthiest amid a wealth effect (historically high stock market valuations). Inflation overshooting is set to continue (3.4% in 2026) at least through 2028, largely because of the rise in oil prices and tariffs – although the impact of these appears to be less significant than expected. The labour market is showing clear signs of improvement that should bring the unemployment rate down toward 4.0%. Given this shift in price and employment risks amid dynamic growth, we expect the FOMC to start a cycle of three rate hikes (+25pb each) at the September 2026 FOMC meeting, bringing the Fed Funds target range at 4,25% - 4,50% in January 2027.
CHINA
Economic growth slowed to 4.3% y/y in Q2 2026 vs. 5.0% in Q1. It is projected to reach 4.6% in 2026 as a whole, down from 5% in 2025. Growth remains characterized by a K-shaped trajectory, and the gap between the strong performance of exports and the fragility of sectors that rely on domestic demand has even widened this year. Domestic demand rebounded in the first two months of 2026 but has weakened significantly since March. The crisis in the property sector continues and household confidence remains low. Fiscal policy measures aimed at supporting economic growth are expected to increase in the second half of the year. CPI inflation rebounded slightly in H1 2026, mostly due to the rise in global energy prices, as well as due to the increase in electronic good prices and anti-involution measures implemented by the authorities. Deflationary pressures persist, however, given weakness in domestic demand.
EUROZONE
Eurozone growth is expected to slow to 1.1% in 2026 (f1.3% in 2025), before strengthening to 1.5% in 2027, supported by higher defence and infrastructure spending as well as the global AI capex cycle. The economy has proven resilient to the energy shock, notably thanks to the increasingly tangible impact of German defence spending on the real economy. Elevated energy prices in the autumn (especially for natural gas), combined with resilient growth, are set to accelerate inflation to a peak around the turn of the year. Annual average inflation is thus expected to reach 3.0% in 2026 (from 2.1% in 2025), before easing to 2.8% in 2027. Given persistent inflation and resilient growth, we anticipate another 25bp hike from the ECB in December 2026, bringing the deposit rate to 2.75%, followed by an extended pause. That said, stronger than expected second-round effects could lead to more tightening than our current baseline.
FRANCE
GDP growth remained low in Q2 (0% after -0.2% in Q1) as a result of deteriorated agricultural and construction output, as well as higher inflation (2.4% in 2026 according to our forecast, after 0.9% in 2025). In 2026, GDP growth should reach 0.5% (after 0.9% in 2025), driven mainly by exports.
UNITED KINGDOM
UK GDP growth would ease slightly to 1.2% in 2026 (1.3% in 2025), holding at a similar 1.3% in 2027. The economy has weathered both the energy price shock and domestic political volatility so far. That said, growth is expected to decelerate in the second half of the year, while inflation should remain stubbornly above target (annual average of 3.2% both in 2026 and 2027), driven by energy, food and a build-up of second-round effects. We expect the BoE to deliver a single "insurance" hike in November, bringing Bank Rate to 4.00%, in response to the ongoing energy shock. We expect the BoE to resume easing in H2 2027, with two cuts taking Bank Rate to 3.50% by end-2027.
JAPAN
We expect annual GDP growth to stand at 1.0% in 2026, down from 1.2% in 2025. Higher inflation and production costs associated with the energy shock are expected to weigh on the economy’s overall performance. On the other hand, the latter is supported by fiscal policy and AI-related investment. Inflation has generally overshot the 2% y/y target since 2022. Accordingly, the Bank of Japan initiated a cautious process of “adjustment in the degree of monetary accommodation” in 2024, lifting the policy rate to 1.0% so far (previously negative) – the highest since 1995. We expect three hikes by the end of Q1 2027, followed by a return to a more cautious pace until the terminal rate of +2.5% is reached in H2 2028. Japan is facing long-term rates pressure, illustrated by historically high 10- and 30-year yields, probably fueled by the level of public debt and the pace of monetary adjustment.
EXCHANGE RATES
In our base-case scenario (gradual normalisation of the Middle East situation with persistent price tensions), we expect the USD depreciation against the EUR to resume, albeit very gradually, amid broader diversification away from the dollar. We forecast EUR/USD to reach 1.16 by Q4 2026 and 1.20 by Q4 2027. We anticipate a depreciation of the yen and the GBP against the dollar in 2026 (USD/JPY 165 and GBP/USD 1.32 by Q4 2026) and 2027.
