1. A soft‑landing world—on paper
The dominant macro narrative going into 2026 looks deceptively comfortable. Major forecasts see global growth around the low‑3% range, with inflation continuing its gradual decline and real wages finally recovering some of the ground lost during the inflation shock. Unlike the 2010s, this outlook is underpinned not only by cheap money but also by ongoing investment in digital infrastructure and AI, which is expected to keep private capex relatively resilient.
Yet beneath the surface, several of the supports for this “soft‑landing” scenario are inherently fragile: services inflation remains sticky, geopolitical flashpoints could disrupt trade and energy flows, and the political calendar is packed with elections that may reshape fiscal and trade policies.
2. Central banks: from hiking to fine‑tuning
Most major central banks have either ended their hiking cycles or are close to doing so, but that does not mean an aggressive pivot to easing. Instead, the baseline is one of gradual, data‑dependent cuts:
- In advanced economies, easing is expected to proceed cautiously as long as core and services inflation grind lower but remain near or slightly above targets.
- In Japan, the BOJ is wrestling with how to normalise policy without choking off a fragile return of wage‑price dynamics, offering few signals on the pace of future moves.
This “fine‑tuning” regime matters for markets. It implies that rate volatility may remain elevated, as every data print can materially shift expectations, even if the big directional move—away from peak rates—is already in place.
3. AI and digital transformation as growth buffers
One of the main reasons forecasters do not anticipate a deep downturn is the role of AI‑related and digital‑transformation investment. Companies across sectors are still spending on cloud migration, automation and data infrastructure, betting that productivity gains will offset higher wage and financing costs.
For banks and investors, this has two implications:
- Sectors tied to AI infrastructure—semiconductors, data centres, cybersecurity, specialised software—may sustain capex even if consumer demand softens.
- Productivity improvements could help central banks tolerate slightly tighter labour markets without reigniting inflation, extending the window for a controlled easing cycle.
However, the benefits from AI are likely to be unevenly distributed, favouring firms and countries with the capital, skills and regulatory environments to deploy these technologies effectively.
4. Fault lines: services inflation, politics and capital rules
Despite lower headline inflation, several fault lines could derail the benign baseline:
- Services inflation remains above target in many economies, driven by wages and housing, leaving central banks little room for error if growth surprises on the upside.
- Politics and geopolitics—from trade tensions and sanctions to election‑driven fiscal shifts—could change growth and inflation expectations abruptly, especially in open economies.
- Regulatory shifts, such as global moves to ease bank capital requirements, may boost credit but also alter the pricing of financial risk if investors question whether buffers remain sufficient.
These factors increase the chance of non‑linear outcomes: long periods of relative calm punctuated by short, sharp episodes of volatility when one of the fault lines moves.
5. What this means for banks and market participants
For banks, a slow‑motion disinflation with cautious easing is a double‑edged sword:
- Net interest margins will gradually compress as policy rates drift lower, but a more predictable rate environment and stable credit quality can support loan growth and fee businesses.
- Banks that align lending and advisory with AI‑related and digital‑infrastructure investment themes are better positioned to grow balance sheets in areas with structural tailwinds.
For investors and corporates:
- Asset allocation needs to account for a world where returns are driven more by relative growth and productivity differentials than by a single global rate regime.
- Scenario analysis and liquidity planning remain critical, as small shifts in inflation, policy or politics can have outsized effects on currencies, term premia and credit spreads
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