U.S. Quarterly Economic Forecast

The Delta Days of Summer

Date Published: September 21, 2021

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This quarter’s economic forecast update reflects a downgrade. The Delta variant’s impact on international supply chains and domestic spending behaviors has slowed the recovery in the near-term and shifted the growth profile into 2022 as the virus ebbs and supply constraints diminish. The economic recovery should proceed uninterrupted. When coupled with persistence in price pressures, the Federal Reserve will begin tapering its asset purchases later this year. By the end of next year, with the economy likely to be encroaching on full employment, it will begin raising the federal funds rate. 

This publication focuses on the numbers, but if you’d like a deeper dive into underlying issues please see our Questions & Answers report published on September 7th. 


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U.S. Forecast

Global Forecast



  • COVID-19 continues to be the primary driver of forecast revisions to the global economic outlook. Europe has handled the wave of the highly infectious Delta-variant relatively well, outperforming expectations in the first half of the year. In contrast, emerging markets with insufficient vaccine-access and healthcare infrastructures have been devastated by its effects. The COVID threat on the EM economies will persist within the near-term forecast, as the COVAX facility anticipates that it will fall short by more than 500 million doses relative to their end of 2021 delivery target.
  • Compared to our June forecast, we have revised down global growth to 5.9% (6.2% previously) in 2021. The forecast for growth in 2022 is unchanged at 4.7%.
  • The downward revision is partly a product of the spread of COVID-19 in Asia. China continues to pursue a zero-tolerance strategy that is forcing regional lockdowns, while South-East Asia struggles under the weight of high infection rates and the related economic disruptions. The forecast was also marked down to reflect a U.S. expansion that has underperformed high expectations. By comparison, the Eurozone proved more resilient than expected in the first half of the year, as climbing vaccination rates are allowing many countries to opt for alternative strategies to lockdowns, such as vaccine or “green” passports. Ongoing re-opening alongside persistent vaccine uptake should support growth through the rest of the year in the common currency area. The U.K. has pushed ahead with reopening, and despite hiccups from supply and labor shortages, 2021 is poised for solid growth.

United States 

  • The downward adjustment to the U.S. outlook does not negate a solid rebound for 2021 of 5.6%. 
  • Looking ahead to 2022, growth is expected to follow through at a solid 4.1% clip as more activities normalize as the pandemic recedes. Continued above-trend growth in 2023 is expected to drive the unemployment rate slightly below its pre-pandemic low to 3.4% enabling rate hikes by the Federal Reserve. 
  • There is still a high degree of uncertainty around this forecast. Downside risks stem from the ongoing uncertainty created by the path of the virus and variants, along with the possibility that supply-side constraints could weigh more heavily on production and consumption. On the upside, Americans have built up a substantial cash cushion, which could drive spending higher than we assume.
  • Fiscal policy presents both upside and downside risks. We assume Congress passes the Infrastructure Investment and Jobs Act, which is a mild positive through the forecast. Any misstep here would therefore present a modest disappointment. On the other hand, Democrats have even larger plans for social spending, funded by tax increases. This has not been factored into the forecast, which could present a boost to growth next year depending on the final details.    


  • We anticipate the Federal Reserve will maintain the current low rate environment until the final quarter of 2022. At that point, it is expected to initiate rate hiking cycles, with the federal funds rate reaching 2.00% by 2024. 
  • Over the coming quarters, we have government yields continue to rise. We believe this rise will be driven by three factors: First, markets will continue to solidify a higher policy path for the federal funds rate. Second, the Federal Reserve will end net-new bond purchases over the coming quarters. Third, lingering inflation will cause investors to demand higher compensation for inflation risk. Though this narrative has been our base case for some time, market pricing has focused on the negative impact of the Delta variant and not the expected growth recovery. Once we get past the current uncertainty, higher bond yields should materialize.  
  • The upside for major currencies is limited versus the U.S. dollar. The Canadian dollar is at fair value based on the Bank of Canada policy path and commodity prices. After a stronger initial recovery, we are expecting an economic deceleration in the Euro Area and Japan, which should weigh on these currencies. We are also less optimistic on emerging market currencies relative to the USD due to the disproportionate impact of the pandemic on these economies.

Forecast Tables & Research

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Contributing Authors

  • Beata Caranci, Chief Economist | 416-982-8067

  • Derek Burleton, Deputy Chief Economist | 416-982-2514

  • James Marple, Managing Director | 416-982-2557

  • Andrew Hencic, Senior Economist

  • Leslie Preston, Senior Economist | 416-983-7053

  • James Orlando, CFA, Senior Economist | 416-413-3180

  • Sri Thanabalasingam, Senior Economist | 416-413-3117