Overview
Bank of America has increased its forecast for global economic expansion over the next several years, citing an easing of energy market concerns following a fragile agreement in Iran. The bank now projects global GDP growth of 3.2% in 2026, accelerating to 3.5% in 2027 before slowing to 3.3% in 2028. Alongside the growth upgrade, BofA lowered its global inflation estimates to 3.0% for this year, 2.4% in 2027 and 2.5% in 2028.
Energy outlook and its role in forecasts
Those revisions reflect the bank's assumptions about oil markets under a scenario in which Middle East tensions do not re-escalate. BofA expects Brent crude to average $72 per barrel in the second half of 2026 and $65 in 2027. The bank stresses that lower oil prices are a material input to the softer inflation profile, although it cautions that reduced energy costs alone are unlikely to deliver easier monetary policy.
Central bank expectations
Despite the improved inflation picture, BofA now anticipates the Federal Reserve will raise interest rates by a cumulative 75 basis points this year, with hikes starting in September. The bank points to a resilient U.S. labor market and persistent inflation pressures as the rationale for further tightening. For Europe, BofA calls for one additional European Central Bank rate increase before the pace of tightening gives way to easing next year.
Structural forces supporting growth
The bank identifies five structural themes that have been supporting the global economy and financial markets: U.S. policy under President Donald Trump, an AI investment boom, China's industrial overcapacity, fiscal imbalances, and abundant global liquidity. While these themes underpin growth and market performance, BofA notes they also raise the system's sensitivity to a sharp tightening in financial conditions that could trigger corrections in asset prices.
Regional outlooks and sector implications
BofA attributes much of its upward revision to an AI-driven export cycle across Asia, with particularly strong export dynamics outside China. It expects lower oil to provide a modest boost to developed markets in 2027. In the United States, the bank projects that cheaper gasoline together with ongoing AI-related capital spending will support a stronger second half of 2026, keeping growth above 2%.
China's overall growth projection remains unchanged at 4.5% for both 2026 and 2027, but BofA highlights a shift in the composition of that growth toward exports. The bank says domestic demand and the pace of economic rebalancing have been disappointing, and it now forecasts export growth of 15% this year, driven by AI-linked investment and robust demand for renewable energy equipment and electric vehicles.
For the euro area, the fall in energy prices has softened the economic hit from the Iran conflict, yet structural challenges persist. BofA expects euro area growth of 0.5% in 2026 and 1.3% in 2027.
Risks to the outlook
Looking forward, BofA calls out three principal risks to its forecasts: renewed escalation in the Middle East that could push energy prices higher; a sharper-than-expected tightening in global financial conditions prompted by a hawkish Federal Reserve; and the potential for the AI investment boom to fade, leading to weaker asset prices and slower investment growth.
These projections frame a global expansion that is stronger than previously expected but remains exposed to geopolitical flare-ups, shifts in monetary policy, and the durability of technology-led investment. The interplay between cheaper energy, AI-driven demand for capital goods and exports, and central bank responses will determine whether the upgraded growth path holds.