Back to the playbook

Research evidence excerpt

Back to the playbook

Barclays | Macro Wrap

• The AI Harness – Financial services under the microscope

• AI maths – Time for a re-think?

• The buy-side view on AI – And the survey says…

• Physical AI – Wealth creation or economic displacement?

• AI gets physical - Drones: A $250bn market by 2035

• The AI Economy – The economics of AI

• AI Disruption – The big debates

Barclays Global Economic Outlook: Halftime

Region Key Points

We revised our policy outlook to assume that the Fed holds rates steady through end-2027,

reflecting heightened concern about persistent inflation. While our updated base case is a

prolonged pause until inflation convincingly returns toward target, risks still skew toward

hikes. Indeed, with nine of the 18 participants who submitted dots favoring at least one hike

this year, we think that the odds of such a pivot are around 40%.

US Retail sales were unexpectedly strong in May, led by a jump in the control group. Although

merchandise sales tied to the World Cup and the Knicks' successful playoff run likely

exaggerated strength, the estimates show little indication that pressures on purchasing

power are restraining consumers. We take some signal, modestly boosting our outlook for

the rest of 2026. We also mark down our inflation outlook, taking signal from recent oil price

developments.

Even if the US and Iran sign a deal, we continue to expect a second 25bp hike in September,

as the deal will support near-term growth but will unlikely fully ease inflation concerns.

We update our growth forecasts and now expect GDP growth of 0.4% in 2026 and 1.0% in

Euro Area 2027 y/y, previously 0.8% and 0.9% respectively.

Our economists now expect headline inflation to hover above 3% until early 2027, before

favourable base effects bring it closer to target.