Trump 2.0: How our daily Consensus Forecasts are changing for the Fed, exchange rates and the world economy
Our Daily Updates for our Consensus Forecasts have shifted since Trump was re-elected president on 5 November, with our panel of economists already altering its projections for the dollar, U.S. inflation and Federal Reserve decisions. The rest of the world economy has not been immune, with the outlook of those economies intertwined with the U.S. particularly susceptible.?
Trump is yet to take power. The panelists we poll as part of the Daily Updates to our Consensus Forecast generally stress that their projections will change in the coming months as Trump’s policy agenda crystalizes. They do not have a crystal ball. But their new predictions will be of keen interest to businesses, consumers and investors who cannot afford to wait until 20 January 2029—the date Trump’s second term will come to an end—to learn about the President-elect’s economic impact.?
The U.S. economy
Since 5 November, our panelists have raised their forecasts for U.S. inflation and the Federal Reserve’s policy rate in 2025, due to the likely inflationary impact of Trump’s tax, tariff and immigration policies.
Analysts at Nomura commented:
“Donald Trump’s victory and [a] certain Red sweep significantly changes our macro outlook. We now see a rebound of US inflation in 2025, fueled by broad-based tariffs which we expect the US to impose in H1 2025. Thus, we now expect the Fed to cut once more in 2024 and only once in 2025 to a still-restrictive 4.125%.”
Analysts at Fitch Solutions said:
“Trump’s win led us to make several changes to our US macro forecasts. The resilience of the US economy in 2025 (expected growth of 1.9%), combined with the potential for higher inflation via tariffs and a wider fiscal deficit (around 7.0% of GDP), will likely see the Fed take a more cautious approach to interest rate cuts. We now forecast that the Fed will cut interest rates by a cumulative 125bps to 3.50% by the end of 2025 (previously: 3.00%).”
The world economy
As a result of likely tariffs under Trump, our panelists have cut their forecasts for 2025 economic growth for China, Europe and other countries with close trading links with the U.S.
Goldman Sachs analysts said:
“We have cut our Euro area GDP forecast to a below-consensus 0.8%, reflecting ongoing structural headwinds and a hit from trade policy uncertainty. We have also shaved our 2025 China GDP forecast to 4.5% because of higher US tariffs that are only partially offset by easier macro policies. Risks in both Europe and China are on the downside if tariffs increase beyond our baseline.”
Analysts at S&P Global said:
“While SSA countries may enjoy some benefits [from a Trump presidency] — such as Chinese redirection of exports initially targeted to the US market — and stronger efforts by BRICS countries to expand their trade and investment footprint, the overall impact of expected US tariff policy is likely to prove adverse for likely SSA growth. We are lowering our 2025- 29 forecast by 0.2 percentage points.”
Exchange rates
As they expect U.S. interest rates to be higher than earlier projected, our panelists now expect the euro, pound and yen—along with emerging-market currencies—to be weaker in 2025 than previously estimated. This may force central banks with such currencies to cut interest rates more slowly, mirroring the Fed.
EIU analysts said:
“We expect a strong dollar to persist into Mr Trump’s second administration. This presents an immediate policy challenge for Mr Trump, who has a long-standing preference for a weaker US dollar to support exports. Structural factors—interest-rate differentials and the current account—will continue to support a strong US dollar.”
Oxford Economics’ Shani Smit-Lengton commented on the outlook for Kenya’s currency:
“Our short-term forecasts [for Kenya] have remained largely unchanged following Trump's victory. However, we have revised our medium- to long-term exchange rate projections to reflect a stronger US dollar. Additionally, our US team has updated their medium- to long-term predictions for 10-year bond yields, which has led to adjustments in our local interest rate forecasts. In light of rising global policy uncertainty, we have also lowered our projections for future investment.”
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