In the US, with the end of the government shutdown, data flow has resumed, albeit slowly. The data received so far does not alter our baseline forecast. We remain of the view that the US economy will re-accelerate in Q1 after pausing in Q4 amid the shutdown. We continue to expect the Fed’s inflation target to be within reach by the end of next year.
In the EA, we stick to the view that EA growth momentum will accelerate next year led by expansionary fiscal policy in Germany. However, while the balance of risks remains to the downside amid poor growth quality and implementation risks, incoming data suggest that Spain outperformance provides a solid floor for EA growth going forward. We continue to expect real GDP growth in 2026 at 1.0% (versus 1.1% consensus). On inflation, we believe the broader core downward trend is likely to remain in place as the annual reset mechanism comes into play and wage growth continues to ease.
In China, economic data show widespread weakness in October, even if certain technical factors have excessively amplified the weakness. Accordingly, we have moderately lowered our real GDP growth forecast for Q4-25 to 4.2% y/y (from 4.4% in the prior baseline). Heading into 2026, we continue to expect GDP to stabilise at 5.0% over 2026. However, based on the revision of the 2025 figures, we have mechanically revised the full-year forecast for 2026 to 5.0% for 2026 from 5.2%. Our expectation of consolidated growth for next year is linked to the fact that recent government announcements indicate that policymakers may have already started making arrangements to accelerate growth. We maintain our view that China’s inflation will remain well below the PBoC target through the forecast horizon.
Monetary policy wise, the ECB’s rhetoric continues to lean towards the hawkish side, and we do not expect the 2028 forecasts (to be published in December) to show inflation falling meaningfully below target, given technical, exogenous support related to the unusual incorporation of ETS2 impact into their forecast outlook. Against this backdrop, we stick to our view that the ECB will stay on hold in December, and cut rates one more time in March, taking the deposit rate to 1.75%. Beyond March, we expect the ECB to remain on hold until the end of 2026, with risks skewed towards the possibility of one additional rate cut.
As we expected, the PBoC held the policy unchanged at its meeting on 20 November. Given that we forecast growth in 2025 to be moderately below the 5.0% target threshold (4.8% according to our forecast), we remain of the view that a rate cut by year-end (22 December) to lay the groundwork for solid growth in 2026 is still on the table.
FABIO FOIS
Head of Investment Research & Advisory
MATTEO GALLONE
Junior Macroeconomist
CHIARA CREMONESI
Senior Rates Strategist
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