1Q26_ Quarterly Outlook Report_Final_EN - Flipbook - Page 58
T H E P LUMB LI N E | A RETU RN TO F I RS T PRI N CI PL ES
UNITED STATES
Derek Holt
Vice President, Scotiabank
Economics
Walid Khalid
Director, Investment
Strategy
Latest
2025f
2026f
2027f
GDP Growth
4.3%
1.9%
1.6%
2.1%
Inflation
2.7%
2.8%
2.4%
2.4%
Unemployment
4.6%
4.2%
4.3%
4.3%
Budget Bal.
-5.8%
-5.8%
-6.4%
-6.2%
Latest
2025
1-yr fwd
2-yr fwd
3-mo yield
3.6%
3.6%
3.4%
3.7%
10-yr yield
4.2%
4.2%
4.4%
4.6%
Yield curve slope
0.5%
0.5%
1.0%
1.0%
Source: Bloomberg Finance LP, Scotiabank Economics, Scotia Wealth Management. "Latest" values are as at December 31, 2025 and, for data other than bond
yields, pertain to the most recent monthly, quarterly, or annual reading available on this date. | Forecasts are based on Scotiabank Economics forecasts dated
December 11, 2025 | 2025 inflation and unemployment are based on the average YoY rates for each month of the year. | 2025 yields are as at December 31, 2025.
Forward periods are relative to December 31, 2025 and are based on forward market pricing
Key conclusions
•
Recent economic data has been mixed, with real GDP rising more than expected in 3Q25,
owing to healthy personal consumption, while the labour market shows clear signs of
deterioration amid rising unemployment and weak hiring breadth across sectors.
•
The Fed’s latest forecasts suggest the central bank will reach the terminal policy rate in
2027. Our forecasts are calling for future policy easing to be front-loaded, with the target
rate expected to fall to 3% this year.
•
Monetary policy outcomes could be influenced by the Fed’s impending leadership
change as President Trump is widely expected to appoint a Chair with dovish policy
leanings to support his desire for lower policy rates.
•
Aggregate consumption is reliant on high income households who account for the
majority of the income and wealth share. Given elevated valuations and narrow equity
market leadership, a market correction could influence consumption appetite among
affluent households.
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