Macro Outlook 2027: Steady Baseline, Downside Risks

The global economy grew 2.7% in 2026, in line with potential, as strong AI capex, easier financial conditions and fiscal expansion offset the energy supply shock. We expect 2.8% in 2027, as lower energy prices and still-strong AI capex outweigh tighter financial conditions and more neutral fiscal policy. Risks are tilted to the downside: renewed escalation in Iran could trigger another energy price surge; large fiscal deficits could push long-term yields higher, especially in France; AI capex could disappoint on capacity constraints, regulation, credit market stress or weaker demand; and there are early signs AI is weighing on the job market. Inflation should slow in 2027 as US tariff pass-through ends, the energy impulse fades as we lap the Iran war outbreak and AI-related pressures ease with rising capacity, though risks on both energy and AI pass-through are on the upside. We expect two more Fed hikes and one from the ECB, with both returning to cuts in late 2027; with most forecast