TD Securities forecasts GDP growth below trend and core inflation above 2% through Q4 2026, delaying Fed cuts.
US output growth is expected to stagnate in 2026 as lingering oil shocks and Iran-related risks keep the Federal Reserve on hold through year-end. TD Securities projects GDP growth at 2.1% quarter-over-quarter by Q4 2026, slightly below trend, with unemployment steady near 4.3%.
Core inflation metrics, including CPI and PCE, are forecast to remain above the Fed’s 2% target, ending 2026 at 2.6% year-over-year. Disinflation is not expected to resume until 2027, with supply chain stress and energy costs sustaining upward pressure on prices. The labor market is seen stabilizing, though hiring uncertainty persists.
The firm assigns a 25% probability of a US recession over the next year, citing stagflationary risks from geopolitical tensions. AI-driven productivity and high-income consumer spending are noted as key supports for underlying growth.