The firm expects AI spending and consumer demand to support growth, but an energy shock could push oil to $150 and trigger recession.
Morgan Stanley projects global GDP growth of 3.2% in 2026, slightly below the 3.5% expected in 2025, as AI investment and US consumer spending underpin the outlook. The forecast assumes crude oil stabilizes around $90 by late 2026, though failure to normalize could drive prices above $150 and spark a downturn.
The firm sees the Fed holding rates steady through 2026, with two cuts possible in early 2027 if inflation eases. US GDP growth is forecast at 2.25% in 2026, supported by AI-driven capital expenditure. Europe faces higher energy exposure, while China remains least vulnerable among major economies.
Global headline inflation is expected to rise near 3% in 2026 before moderating, with limited impact on core inflation in most regions. The ECB is projected to hike rates twice this year before reversing course in 2027.