Economists forecast 2.1% Q4/Q4 GDP growth in 2026 with sticky inflation delaying Fed cuts amid stagflation risks.
TD Securities economists project US output growth will remain flat in 2025 due to lingering oil shocks and geopolitical tensions from the Iran conflict. These factors are expected to create stagflationary pressures, keeping the Federal Reserve on hold throughout the year.
GDP growth is forecast to stay slightly below trend in 2026, ending at 2.1% Q4/Q4, with unemployment near 4.3%. Core CPI inflation is projected at 2.6% y/y by Q4 2026, while core PCE inflation remains elevated. Disinflation is not expected to resume meaningfully until 2027.
The economists assign a 25% probability of a US recession over the next year, citing rising input costs and labor market uncertainty as key risks. High-income consumers and AI-driven productivity have provided some support to underlying growth.