Our economic outlook for the United States

The U.S. economy has remained resilient despite significant economic policy uncertainty through the first half of 2025. The labor market has cooled but remains stable, and inflation data has come in better than expected. The recent de-escalation of tariff policy with China was a pivotal development, and we have made meaningful, positive revisions to our outlook as a result. Overall, we see a less stagflationary impact to the economy and view the risk of further escalation in trade policy as having been materially reduced. We expect the focus to shift toward fiscal policy in the second half of the year.

Federal Reserve interest rate policy is likely on hold for now, and recent positive tariff developments should mitigate worst-case dual-mandate challenges for the Fed. If the labor market remains on the trajectory we expect, the Fed can afford to be patient. We anticipate that the Fed will be able to make two more rate cuts later this year in this environment. However, policy nuance will be crucial, and uncertainty remains high. Inflation expectations and the persistence of tariff-related inflation are likely to play a central role.