US – On a structurally cooling trend

Danske Research Team Danske Bank A/S

Economic growth cooled towards the end of 2025, partly reflecting a rebound in imports. We expect structural forces to cool growth further in 2026, even though more favourable growth overhang lifts 2026 GDP forecast compared to December.

We lift our 2026 GDP growth forecast to 2.0% (from 1.8%) but maintain 2027 at 1.7%. Stagnant labour supply growth and cooling wage growth are set to weigh on household consumption growth, which is only partially compensated by rising fixed investment spending.

Inflation continues to evolve mostly in line with our forecasts despite the distortions that affected data in Q4. Slowing housing and unit labour cost growth will maintain overall inflation in check, even though tariff pass-through will still lift goods and food prices in 2026. We forecast headline inflation at 2.4% in 2026 (from 2.5%) and 2.4% in 2027 (unchanged). We forecast core inflation at 2.5% in 2026 (from 2.8%) and 2.6% in 2027 (unchanged).

We expect the Fed to deliver two more 25bp rate cuts in June and September (prev. March and June) and then maintain the terminal rate of 3.00-3.25% through the rest of 2026 and 2027 (unchanged). Risks around the outlook are balanced. Sudden slowdown in private consumption could tilt the Fed towards resuming more aggressive rate cuts, but fiscal easing and stronger global manufacturing boom could allow the Fed to maintain rates at current levels for longer.

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Danske Research Team

Danske Bank A/S

Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.

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