USD: Slow decrease expected as economic expansion eases – BNP Paribas

BNP Paribas Forecasts: US Economic Outlook for 2026

Analysts at BNP Paribas anticipate that the United States will experience stronger-than-average economic expansion in 2026, with GDP growth reaching 2.9% and inflation remaining at 3.0%. Following three interest rate reductions in 2025, the Federal Reserve is expected to maintain its policy stance, keeping the Fed Funds target range at 3.5% to 3.75% throughout 2026. Within this environment, the Dollar is likely to weaken further against the Euro.

Federal Reserve Maintains Rates as Dollar Declines

• The US economy is projected to expand at a rate above its long-term trend in 2026, averaging 2.9% growth annually—a notable increase from the 2.1% forecasted for 2025.
• Inflation is anticipated to persist above target levels, reaching 3.0% in 2026 and continuing through at least the end of 2027. This is attributed to ongoing tariffs and rising oil prices, though the effects of tariffs are proving less impactful than previously thought.
• Shifts in the Federal Reserve's risk assessment, with greater focus on employment, have initiated a new phase of rate reductions.
• The Federal Open Market Committee (FOMC) enacted three rate cuts totaling 75 basis points in 2025, and the Fed Funds rate is expected to remain unchanged at 3.5%–3.75% during 2026.
• Strategists predict continued depreciation of the US dollar against the euro.

This report was produced with assistance from an AI tool and subsequently reviewed by an editor.