BNP Paribas analysts project that the US economy will grow above its potential pace in 2026, with an average annual GDP growth rate of 2.7%, marking an improvement from 2.1% in 2025 [1]. Inflation is expected to remain elevated, overshooting the Federal Reserve's target at 3.1% in 2026, and is anticipated to persist until at least 2028 due to factors such as tariffs and rising oil prices, though the impact of tariffs appears less significant than previously expected [1].
The Federal Open Market Committee (FOMC) implemented three rate cuts totaling 75 basis points in 2025, and BNP Paribas expects the Fed Funds target range to be held steady at 3.5% - 3.75% throughout 2026 [1]. Despite the resilience of the US economy, BNP Paribas forecasts that the US dollar will continue to depreciate against the euro into late 2026 [1].
In contrast, the analysts anticipate a slight depreciation of the yen and the British pound against the dollar, with USD/JPY projected at 160 and GBP/USD at 1.3 in Q4 2026 [1]. No immediate market reactions or analyst opinions regarding the implications of these forecasts were discussed in the article [1].
CONCLUSION
BNP Paribas expects the US dollar to weaken against the euro through late 2026, despite robust US economic growth and steady Fed policy. The yen and pound are forecasted to depreciate slightly against the dollar. Elevated inflation and steady interest rates are key factors shaping this outlook.