Goldman Sachs’ 2026 Growth Outlook: Inflation Eases, Rate Cuts on the Horizon

Goldman Sachs’ Macro Outlook 2026 paints a measured but positive view of the global economy: growth above trend (~2.8%), easing inflation pressures, and room for monetary policy normalization. Compared against other forecasts, GS is relatively optimistic, particularly for the U.S. In contrast, the OECD forecasts are more conservative, expecting global growth closer to 3.0% and U.S. growth under 2.0% in 2026 due to trade tensions and uncertainty. Morgan Stanley aligns partially, predicting global growth around 3.2% in 2026 but lower U.S. growth (~1.8%).

Critical drivers of GS’s bullish U.S. outlook include the fiscal boost from tax cuts (the “One Big Beautiful Bill Act”), tariff relief, and improved financial conditions. These are expected to front-load support, especially in 1H 2026, pushing U.S. GDP up to 2.6%—well above most peer forecasts. At the same time, labor market strength appears weak: job growth trails pre-pandemic levels, and immigration declines are reducing labor supply, particularly in the U.S. This limits acceleration in incomes and may strain broader demand.

In China, export strength is sustaining growth, but an ongoing property sector decline (sales down ~60%, starts down ~80% from peak) is acting as a major drag. Weak domestic demand offsets strengths in high-quality manufacturing. The country’s rising current account surplus—projected to approach 1% of global GDP—is also a signal of imbalance, potentially creating friction for trade partners, especially Germany and euro area export sectors.

Policy implications hinge on inflation and labor. GS expects core inflation in major developed economies to fall toward central bank targets, aided by base effects and easing tariff pass-through. This supports GS’s expectations for interest rate cuts: 50 basis points in the U.S., with rates dropping from around 3.75–4% to 3.0–3.25%; similar easing is anticipated in UK and Norway; euro area central banks seem likely to stand pat, barring new shocks.

Strategic implications for investors and policymakers include positioning for equities to benefit from a benign macrobackdrop—tax cuts, easing rates, resilient growth—but with vigilance for risks: slowing wage gains, disruptions in China, tariff flare-ups, and labor-market constraints. Alternative scenarios outlined by other analysts—slower growth, sticky inflation, possible recession in the U.S.—highlight how sensitive outcomes are to policy, external shocks, and inflation persistence.

Open questions include: How much slack remains in labor markets globally? To what extent will AI productivity gains come through by end-2026? Can China stabilize domestic demand post-property-sector headwinds? And will global trade policy and tariffs stay stable enough to avoid disrupting inflation and growth expectations?