BNP Paribas projects that the US economy will grow above its potential in 2026, with GDP expected to reach 2.4%, an increase from 2.1% in 2025 [1]. The bank anticipates inflation to continue overshooting, reaching 3.8% in 2026, and remaining elevated at least through 2028, primarily due to rising oil prices and tariffs, though the impact of these factors is considered less significant than previously expected [1].
The Federal Reserve is expected to keep the Fed Funds target range steady at 3.5% to 3.75%, as the FOMC adopts a 'two-sided outlook,' indicating equal readiness to implement rate hikes or cuts if warranted by economic conditions [1]. BNP Paribas notes that the apparent resilience of the US economy is driven by investment linked to AI optimism and consumption by the wealthiest, supported by historically high stock market valuations, despite underlying K-shaped growth dynamics [1].
In the foreign exchange market, BNP Paribas forecasts a gradual depreciation of the US Dollar against the Euro. The bank expects the EUR/USD exchange rate to reach 1.21 by the fourth quarter of 2026 and 1.25 by the fourth quarter of 2027, citing broader diversification away from the dollar and a base-case scenario of gradual normalization in the Middle East with persistent price tensions [1].
No immediate market reactions or analyst opinions beyond BNP Paribas' projections are discussed in the source article [1].
CONCLUSION
BNP Paribas anticipates a steady Fed policy and continued above-potential US growth, but expects the US Dollar to gradually weaken against the Euro through 2027. The bank's projections suggest ongoing inflationary pressures and a shift toward currency diversification, with EUR/USD forecasted to rise to 1.25 by Q4 2027.