United States: Sideways growth and sticky inflation – TD Securities
TD Securities economists Oscar Munoz and Eli Nir expect US output growth to move sideways in 2025 as the lingering Oil shock and Iran conflict create stagflationary risks, keeping the Fed on hold.
TD Securities economists anticipate a stagnant US economy in 2025 due to lingering oil shock and Iran conflict, which could lead to stagflation and keep the Federal Reserve on the sidelines. GDP growth may hover slightly below trend, peaking at 2.1% Q4/Q4 in 2026 while unemployment remains around 4.3%. Labor market stabilization is expected, but rising costs from the oil crisis could impede hiring.
The odds of a US recession stand at 25% over the next year. Supply chain disruptions and stressed conditions suggest little room for inflation to subside this year, with core CPI inflation expected to stay above 2.6% y/y by year-end. Gradual disinflation is anticipated to start in 2027. The impact of higher oil prices is primarily reflected in headline inflation, and the USD may weaken due to eased expectations of Fed tightening in September, benefiting GBP/USD and EUR/USD.
Gold and Bitcoin exhibit bullish trends, while the Federal Reserve is expected to maintain interest rates steady through September.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
