The updating of economic forecast scenarios by the major research centres in recent weeks reflects the fact that the world economy is moving at a higher cruising speed than had been anticipated at the beginning of the year, when «hurricane Trump» was threatening to destabilise an economic environment exposed to the winds of uncertainty. For now, the incipient distortions affecting growth and inflation triggered by the increased tariff barriers are being offset by the AI-driven investment boom in the US, the increase in defence spending (and the acceleration of the NGEU programme) in Europe, the resilience of Chinese exports and the easing of global monetary conditions. To top it all off, the oil price is almost 15% below where it stood at the start of the year and significant wealth has been generated by the rally in global stocks (+17%) and other financial and real assets in 2025 (gold, housing, etc.), despite the ongoing instability in the geopolitical scenario in recent weeks (with the US government shutdown and the resignation of the French prime minister).

As a result of all of the above, we now expect the global economy to grow by 3.1% this year and next (up from 2.9% previously), driven by upward revisions in the US (from 1.3% to 1.8% in 2025) and China (from 4.2% to 4.6%), in addition to marginal improvements in the euro area (from 1.2% to 1.3%), with Spain expected to perform particularly well (2.9%, up from the 2.4% predicted previously). The narrative that has been supporting this strong prognosis for economic activity and the markets in recent months is that, once the risks posed by tariffs has stabilised, the investment cycle (AI + defence + housing) can take over as the engine of economic activity, after a long period of apathy since the 2008 financial crisis. In fact, we have already seen in the activity data for Q2 some significant recoveries in gross fixed capital formation in countries such as Spain and the US, and in the future this recovery could be compounded by a very favourable financial situation among private agents, following the long deleveraging process of the last decade.

The hope is that this new investment cycle can lead to the necessary jump in productivity in order to offset the inexorable demographic trends that most developed countries will face in the coming decades, allowing potential growth to be reinvigorated. The risk is that of an investment bubble (as occurred in Spain at the beginning of this century) related to AI. In fact, right now, the US economy continues to enjoy dynamic growth thanks to immense investment in this area.

In this context of change and disruption, it is no surprise that central banks are falling back on the old strategy of managing the risks in the scenario, rather than employing discretionary policy rules (Taylor, etc.). Starting with the Fed, and beyond political pressures, its recent interest rate cut can be interpreted as a hedge against a possible further weakening of the labour market, which Powell has described as being in a «curious kind of balance», in view of the simultaneous slowdown in both the supply and the demand of workers (a «low-hire, low-fire» job market). This has significantly reduced job creation, which is needed to keep the unemployment rate unchanged. The problem is that the Trump administration’s new migration policy could cut the growth of the labour force from 1% in 2024 down to 0.2%-0.3% by 2027, and faced with such a restriction of additional supply, monetary policy will struggle to respond. So, from now on, monetary policy will take a much more flexible approach to responding to changes in an economic scenario that is subject to high volatility. This intrinsic complexity in the scenario introduces a high degree of uncertainty regarding how the structural relationships between growth, employment and inflation might evolve, and this would explain the wide range of opinions that has opened up within the Fed’s Board of Governors (as reflected in the dot plot) regarding the level of long-term neutral or equilibrium interest rates (ranging from 2.5% to 4%). That said, in such cases of divergent viewpoints, we should always keep in mind the old maxim of Churchill: «If you put two economists in a room, you get two opinions. Unless one of them is Lord Keynes, in which case you get three.»