Serena Tang and Seth Carpenter discuss Morgan Stanley's economic outlook for 2026, focusing on global growth, inflation, and central bank policies. They anticipate a slight slowdown in global growth with varied regional performances: a near-term slowdown followed by a pickup in the US, tepid growth in China due to deflation, and unremarkable growth in Europe. They highlight the U.S. as a key driver, with potential upside and downside risks depending on spending and labor market signals. The conversation covers the Fed's likely path of rate cuts, the ECB's potential easing, and Japan's expected rate hike. They also delve into the impact of AI, emphasizing its current demand-side effects through CapEx spending and its future potential to boost productivity. They provide numerical forecasts, including approximately 3% global GDP growth and 1.75% for the U.S., noting stronger business and household spending and the Fed's willingness to ease rates.
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