"As a result, GDP with grow at a robust rate of 2.5% in both 2026 and 2027, even after accounting for a weaker job market that will slow consumption. "With core inflation remaining above the 2% target for some considerable time, we think the Fed will cut its policy rate by only 25bp in 2026, putting the new Fed Chair and President Trump at loggerheads almost immediately," Capital Economics predicted."
"The president is considering National Economic Council Director Kevin Hassett, Fed governor Christopher Waller, and former Fed governor Kevin Warsh. The prediction market Kalshi has Hassett as the favorite with 54% odds to be picked, followed by Warsh (24%) and Waller (14%). On Wednesday, Trump said he will name someone "who believes in lower interest rates by a lot." A week before that, after the Fed cut rates by a quarter point to 3.5%-3.75%, he complained that it could have been "at least doubled.""
A new Federal Reserve chair will be nominated soon to replace Jerome Powell whose term ends in May. Capital Economics projects that a multiyear boom in capital spending driven by artificial intelligence will cause a surge in business investment. GDP will grow about 2.5% in both 2026 and 2027 despite a weaker job market that slows consumption. Business investment is expected to rise 6.5% in 2026 and 7.4% in 2027. With core inflation remaining above the 2% target for an extended period, the Fed will cut its policy rate by only 25 basis points in 2026, likely creating early tension with President Trump.
Read at Fortune
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