Our economic outlook for the United States

Growth continues to demonstrate resilience, with activity tracking at a pace consistent with an economy expanding above 2%. Business investment remains a notable source of strength, exceeding already robust expectations as firms continue to deploy capital in response to AI demand. We expect this capex cycle to remain an important contributor to growth through 2027. Consumer spending is also evolving broadly in line with expectations, supported by tax policy tailwinds and the continued benefits of elevated household wealth. Softer real income growth presents a potential headwind to consumption during the second half of the year.

The labor market remains fundamentally stable, with a broad range of indicators suggesting conditions remain close to neutral and consistent with overall health. While we continue to anticipate some moderation in payroll growth and a modest increase in unemployment during the summer months, we do not view these developments as signaling material deterioration.

Inflation continues to be distorted by measurement issues and temporary factors. However, underlying price pressures appear to be stuck in a range just below 3%. As a result, we expect the Federal Reserve to remain on hold, with risks increasingly skewed toward additional tightening should inflation fail to moderate or labor market conditions remain firm.