US economic outlook 2025-2027: UBS breaks down what's next

Investing.com -- In its latest Global Economic Perspectives note, UBS outlined a mixed yet cautiously optimistic economic outlook for the U.S. through 2027, influenced by anticipated fiscal changes, tariffs, and a shifting political landscape.

The bank said that with Republicans likely to control the White House and Congress, it expects an extension of the 2017 Tax Cuts and Jobs Act alongside increased tariffs on Chinese imports, which will shape growth, inflation, and employment.

UBS projects a moderate economic slowdown initially, with nonfarm payroll growth easing from over 200,000 jobs per month in 2023 to 148,000 per month by September 2025.

Despite this, inflation is expected to ease further in 2025, keeping the Federal Open Market Committee (FOMC) on a path to cut interest rates.

UBS analysts suggest that the FOMC will proceed cautiously, especially as new tariffs are phased in by 2026, noting that “how the FOMC might respond to tariffs is significantly more complicated than any simple narrative.”

The fiscal policy impacts are expected to take effect in 2026, likely leading to a reduction in GDP growth by about 0.1 percentage points in Q4 of that year, primarily due to tariffs counterbalancing any fiscal stimulus.

The bank foresees an economic acceleration by 2027 as the effects of tariffs and uncertainties around tax policies begin to ease.

However, high deficits remain a concern, with UBS stressing that "the ebb and flow of the economic contour" will depend on unpredictable elements such as the timing of fiscal policy and demographic changes.

UBS concludes with a data-rich analysis to support its forecasts, noting the complexity of the economic landscape and inviting further debate on how these factors will interact in the coming years.

Source: Investing.com