United States

The U.S. economy has performed well in 2025, quickly adapting to a significant shift in policies with growth reaching 2 percent (on a Q4/Q4 basis) even though the government shutdown took a bite out of activity in the fourth quarter. Strong, broad-based productivity growth over the past few years has set the U.S. economy apart from its peers. Growth is expected to accelerate modestly in 2026, supported by expansionary fiscal policy, a waning drag from tariffs, and the impact of policy rate cuts in 2025. As the passthrough of tariffs to consumer prices wanes, core PCE inflation is expected to fall to 2 percent by 2027H1, but headline PCE could be somewhat higher, impacted by world oil prices. Risks around the near-term outlook for activity and unemployment are balanced while risks to inflation are to the upside. The external position in 2025 was moderately weaker than implied by medium-term fundamentals and desirable policies.