According to Jocelyn Paquet of National Bank of Canada (NBC), despite the ongoing conflict in the Middle East and elevated oil prices, the U.S. economy is expected to maintain solid growth, with GDP projected at 2.5% in 2026 and 2.1% in 2027 [1]. NBC's baseline scenario anticipates two Federal Reserve rate cuts this year, although the bank acknowledges increasing risks that policymakers may delay easing due to inflation remaining above the 2% target for nearly five years [1].
Paquet notes that the Middle East conflict is likely to negatively impact growth, primarily through reduced foreign demand and weaker exports, while rising oil prices have already pushed up long-term interest rates and could result in a less accommodative monetary policy [1]. Although the Fed is theoretically expected to overlook price surges from supply shocks, the reality may differ given persistent inflation and policymakers' desire to avoid repeating past mistakes, such as underestimating the effects of Russia's invasion of Ukraine four years ago [1].
NBC expects improvement in employment during the second half of the year, which should support sustained consumption growth. This, combined with robust investment spending, underpins the forecasted GDP growth, though it is slightly less optimistic than previous projections made before the outbreak of hostilities in the Middle East [1].
No specific market reactions or analyst opinions beyond NBC's forecasts are mentioned in the article [1].
CONCLUSION
NBC projects continued solid U.S. economic growth despite geopolitical and inflationary pressures, with GDP forecasts at 2.5% in 2026 and 2.1% in 2027. While two Fed rate cuts are still expected this year, rising risks of delayed easing remain due to persistent inflation and elevated oil prices. The outlook is slightly less robust than before the Middle East conflict, but employment and investment are seen as supporting factors for ongoing expansion.