Mufg us macro strategy macro2markets us monthly outlook october 2026

Key arguments

• AI investment boom is large but concentrated in computer equipment, not yet lifting the broader economy into a stronger growth regime.
• Broader demand growth of 2.5–3.5% resembles the shallow post-GFC expansion, well short of pre-dot-com rates.
• Labor market is stagnant, with hiring at decade lows, though advanced manufacturing is a standout performer.
• Core PCE disinflation momentum supports the FOMC, but broad price distribution signals persistence.

Corresponding source evidence

1. Yet despite this surge, broader demand growth still resembles the shallow post-GFC expansion, when annual growth in real final sales to private domestic purchasers grew at a 2.5 –3.5% pace.
2. Fed & Rates View ▪ Fed View: The market is prepped for a much more hawkish Fed than what, we think, will ultimately be delivered.
3. Fed funds futures are pricing roughly three additional rate hikes over the next 12 months, but our base case is that the policy rate remains at today's level over that period, with at most one additional hike in Dec ‘26 before an eventual cut in Sep ‘27.