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Danske Bank's research team forecasts a further slowdown in U.S. economic growth by 2026, despite a marginally higher GDP projection, due to structural challenges such as labor shortages and supply chain bottlenecks. Inflation is expected to remain stable, with both headline and core measures hovering near 2.5%, aligning with the Federal Reserve's long-term target. The bank emphasizes that these projections suggest a gradual Federal Reserve policy shift toward rate cuts, rather than abrupt adjustments. For forex and equity traders, this outlook implies a prolonged period of low volatility in U.S. interest rates. A slower GDP growth rate could weaken the U.S. dollar against major currencies like the euro and yen, while stable inflation reduces the urgency for aggressive monetary tightening. Investors should monitor upcoming Fed statements and inflation data for confirmation of this path. The implications for global markets include sustained pressure on the U.S. dollar and potential outflows into emerging markets as rate differentials narrow. Traders should watch for Fed policy signals in Q4 2024 and early 2025, as well as any deviations in inflation metrics from the projected 2.5% threshold. This scenario favors a balanced portfolio with exposure to USD-sensitive assets and inflation-linked bonds.
