A new year has begun, but Morgan Stanley analysts say the economic outlook for the next twelve months looks surprisingly familiar. They point to continued, gradual improvement in growth as one of the strongest parallels to last year.
However, there is a major difference: central bank policy. The Federal Reserve is now in an easing cycle as 2026 begins, unlike in 2025, when rates were still tight.
Globally, many central banks are now at or near “neutral” levels—rates that neither stimulate nor slow the economy. Because of this, markets are expected to focus heavily on central bank decisions in the first half of the year.
In the United States, economic data from the third quarter showed strong momentum. At the same time, businesses are starting to pass tariff-related costs on to consumers instead of absorbing them.
Although October’s nominal spending looked strong, real consumer spending is slowing in the fourth quarter compared to the third. The slowdown is expected to be mild because of Fed rate cuts and upcoming fiscal support, but it will still influence how policymakers move forward.