Economic outlook 2025-26: Defying gravity?

Executive Summary

The wicked witch of the west is (almost) dead! We’re talking about inflation, of course. But will 2025 be the year we can finally stop paying attention to the men and women behind the curtain? After a super electoral year, 2025 will be all about effective policy making. As markets reached a new high this year, one question is on everyone’s mind: will risky assets continue to be “popular” (you’re gonna be popular)? In keeping with our tradition, we couldn’t resist taking some musical inspiration for our last economic outlook of the year. We hope you find it Wicked.

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• What to watch?
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• Global economic growth: Not quite “dancing through life”. Global real GDP growth is expected to remain moderate but steady at +2.8% in 2025- 26. 
• Is “something bad” on the way? After the super electoral year, “the Wizards (and not us)” of policy design will be very influential for both the economy and capital markets.
• “No one mourns the wicked”: Inflation should finally retreat to 2% in 2025, allowing for monetary policy easing to continue until end-2025.