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        Weekly Economic Perspectives (Quarterly Edition)

        Little to See, Much to Worry About

        Despite imminent risks of further escalation in trade tensions, the big shift in German policymaking is to us an equally important macro story from the past quarter.

        5 min read
        Simona M Mocuta
        Chief Economist
        Amy Le, CFA
        Investment Strategist
        Elliot Hentov, Ph.D.
        Head of Macro Policy Research
        Vladimir Gorshkov, CFA
        Macro Policy Strategist
        Venkata Vamsea Krishna Bhimavarapu
        Economist

        If there was ever a time when we shouldn't rely too heavily on forecasts, it is now. If you were to simply look at Figure 1 below and walk away without further investigation, you could easily conclude that all is right with the global economy. You would be wrong. Admittedly, steady growth near trend is not a bad outcome. But what that chart doesn’t tell you is that there is considerable turmoil brewing that has the potential to disrupt this appearance of calm in the months ahead.

        So why not reflect those risks more visibly in the numbers? There are three reasons. First, because three months since our December update, we still grapple with considerable uncertainty around the “what”, the “when”, the “how”, and the “how long” of incoming US policy changes. Secondly, because even as some risks grow (i.e., trade), progress elsewhere (deregulation in US, stimulus in China), offer some partial offsets. And thirdly, the German debt break deal is a genuinely positive development whose beneficial impact will be felt over time. This is why, even as we trimmed US, Canadian, and UK growth, the 2025 eurozone forecast is unchanged. We see meaningful further improvement in 2026.

        Despite imminent risks of further escalation in trade tensions (see More Storms Brewing: Are Tariffs on Europe Next?), the big shift in German policymaking is to us the equally important macro story of the past quarter. It speaks to a narrowing of the US growth outperformance, which had been previously anticipated in 2024 but failed to materialize. Now, there is a powerful fundamental catalyst behind that expectation in 2025. It is too soon to give up on the US exceptionalism story (separate policy goals from policy tactics), but it may ben time to believe in Europe once again.

        Central bank expectations are unchanged. We expect another hike from the BoJ, and 75 bp worth of cuts from Fed, 100 bp from ECB, and 125 bp from the BoE for the year as a whole.

        Catch the whole story...

        Catch the whole story...

        There's more to the Weekly Economic Perspectives in PDF. Take a look at our Week in Review table – a short and sweet summary of the major data releases and the key developments to look out for next week.

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