Key points
Still-sound money
As interest rates return toward neutral, we expect them to settle at higher levels than in the 2010s. This environment sets the foundation for solid cash and fixed income returns over the next decade.
U.S. economic resilience
Positive labour supply and productivity developments drove U.S. growth in 2024. Whether these drivers wane or accelerate, coupled with demand factors such as fiscal stimulus, holds the key in 2025.
Growing market tension
The possibility that we are experiencing a valuation supporting productivity boom must be balanced by the risk that economic developments could expose the vulnerability of stretched equity valuations.
Vanguard Economic and Market Outlook for 2025
The U.S. economy has had a remarkable run—strong growth, full employment, moderating inflation, and solid market returns. In this short video, Vanguard Global Chief Economist Joe Davis discusses whether that momentum can continue in 2025.
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Vanguard's 2025 economic forecasts
GDP growth
| Country/region | Vanguard 2025 | Trend |
| Canada | 1.7% | 2.1% |
| U.S. | 2.1% | 2.7% |
| Euro area | 0.5% | 1.2% |
| U.K. | 1.4% | 1.2% |
| China | 4.5% | 4.2% |
| Japan | 1.2% | 1.0% |
Unemployment rate
| Country/region | Vanguard 2025 | NAIRU |
| Canada | 6.8% | 5.8% - 6.3% |
| U.S. | 4.4% | 4.5% |
| Euro area | 6.9% | 6.5%- 7% |
| U.K. | 4.4% | 4% - 4.5% |
| China | 5.1% | 5% |
| Japan | 2.4% | 2.5% - 3% |
Core inflation
| Country/region | Vanguard 2025 |
| Canada | 2.2% |
| U.S. | 2.5% |
| Euro area | 1.9% |
| U.K. | 2.4% |
| China | 1.5% |
| Japan | 2.1% |
Monetary policy
| Country / region | Year - end 2024 | Year - end 2025 | Neutral rate |
| Canada | 3.5% | 2.5% | 2.25% - 3.25% |
| U.S. | 4.5% | 4.0% | 3.5% |
| Euro area | 3% | 1.75% | 2% - 2.5% |
| U.K. | 4.75% | 3.75% | 3% - 3.5% |
| China | 1.4% | 1.2% | 4.5% - 5% |
| Japan | 0.5% | 1.0% | 0% |
Notes: Forecasts are as of November 12, 2024. For the U.S., GDP growth is defined as the year-over-year change in fourth-quarter GDP. For all other countries/regions, GDP growth is defined as the annual change in GDP in the forecast year compared with the previous year. Unemployment rate forecasts are the average for the fourth quarter of 2025. NAIRU is the nonaccelerating inflation rate of unemployment, a measure of labor market equilibrium. Core inflation excludes volatile food and energy prices. For the U.S., euro area, U.K., and Japan, core inflation is defined as the year-over-year change in the fourth quarter compared with the previous year. For China, core inflation is defined as the average annual change compared with the previous year. For the U.S., core inflation is based on the core Personal Consumption Expenditures Index. For all other countries/regions, core inflation is based on the core Consumer Price Index. For U.S. monetary policy, Vanguard’s forecast refers to the top end of the Federal Open Market Committee’s target range. China’s policy rate is the seven-day reverse repo rate. The neutral rate is the equilibrium policy rate at which no easing or tightening pressures are being placed on an economy or its financial markets.
Source: Vanguard.
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