As the U.S. economy enters a new year, it faces a significant structural change driven by higher interest rates, persistent inflation and a more restrictive policy framework, particularly in trade relations.

RSM's Joe Brusuelas, in his baseline forecast, projects that the economy will grow at a 2.5% rate, unemployment will be 4.2% and inflation will ease to 2.2%. Additionally, he anticipates that the Federal Reserve will lower its policy rate to 3.5% and the 10-year Treasury yield will finish the year at 4.5%.

Brusuelas assigns a 55% probability to this baseline scenario, while also acknowledging the possibility of stronger economic performance (30% probability) or a recession (15% probability).

An important element of this evolving economic landscape is the shift in global trade dynamics. Brusuelas identifies an emerging coalition of nations—call it the dollar bloc—aligned with American economic and security interests. He examines what is driving these changes and their potential impact on middle market businesses and broader U.S. economic conditions.

We look at these topics and more in this issue of The Real Economy.