Quarterly Outlook Update 2025-27: 10 Top-of-Mind Questions, Answered

Executive Summary

• 1. Who truly bears the cost of the ongoing trade war? Primarily exporters for now, but US consumers will also be hit through higher inflation (up by 0.6pp by mid-2026). While global trade routes have shifted, allowing exporters to mitigate the impact, downside risks remain high as sectorial investigations are ongoing and the trade deal with China is still pending.
• 2. Has stagflation transitioned from a looming risk to an undeniable reality? Yes, but it is stagflation light for now. Inflation remains above target in many advanced economies – such as the UK, US and Japan – while growth stays lackluster. 
• 3. Can central banks untangle their complex dilemmas? Central banks in developed markets are navigating a threefold challenge: weak growth, lingering inflation and rising fiscal deficits that are pushing up long-term yields and intensifying focus on global quantitative tightening (QT).
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