The US economy remains strong with no signs of a major slowdown going into 2025. We see interest rates staying higher for longer on a relative basis (regardless of the Fed’s easing campaign) as inflation remains above target, employment strong, and spending robust.
The US economy has charted its own path in the post-pandemic world and is expected to continue to do so in 2025. Why? First, the economy has proven much less sensitive to interest rate hikes than in years past. Second, the US is experiencing a surge in corporate and research spending on the back of the Artificial Intelligence (AI) boom. And third, fiscal policy has been much more stimulative than anywhere else in the world. We see strong GDP growth, moderate unemployment, and persistent inflation in 2025. We believe the Fed will lower interest rates at a slower pace than the market expects.
Key Takeaways
- The outlook for the US economy remains strong with no signs of a major slowdown going into 2025. We continue to see interest rates staying higher for longer on a relative basis, regardless of the Federal Reserve’s ongoing monetary easing campaign.
- It is too early to assess the impact of potential new policies following Donald Trump’s election as US president. That said, if implemented, his key policy objectives—lower taxes, higher tariffs, and reduced immigration—could increase rates, boost asset prices, drive inflation, and strengthen the dollar.
- The US economy has charted its own path in the post-pandemic world, and it is diverging from both its own historical performance in a context of higher rates as well as its historical correlation to other developed economies, especially Europe and Japan. We see this trend continuing in 2025.
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