Our economic outlook for the United States

The U.S. economic outlook remains constructive, with growth expected to be anchored by strong business investment and healthy consumption. We expect real GDP to grow by around the mid‑2% range, driven primarily by robust AI‑related capital expenditures and resilient private domestic demand.

We view the labor market as stable, despite weakness reflected in the March 6 U.S. labor report, with concentrated health care job creation being a structural feature and unemployment expected to remain broadly steady over the year. While labor market risks increasingly reflect the potential for more rapid AI impacts rather than economic weakening, we see near-term stability as the most likely outcome.

Many of the 92,000 job losses in February, as reported by the U.S. Bureau of Labor Statistics, can be attributed to severe winter weather and strikes in the health care sector. We would expect to see further instances of monthly job loss this year given immigration- and demographic-related changes in the workforce that have lowered the breakeven rate, or the job-creation rate that would cause a change in the unemployment rate. However, we continue to anticipate a resilient labor market in 2026.

Inflation continues to decelerate. We project that core inflation will ease toward roughly 2.6% by year‑end 2026, supported by continued housing disinflation and improving productivity trends. While services inflation remains sticky due to wage firmness, the balance of inflation risks skews modestly to the downside. Trade‑related inflation pressures are more muted than previously feared, as tariff exemptions and legal constraints have limited effective tariff pass‑through.

We continue to pay attention to the oil market and events in the Middle East for their potential to push inflation higher or disrupt financial conditions.

Against this backdrop, we assess monetary policy to be near neutral, or the rate where it would neither stimulate nor restrict the economy. With growth remaining firm and inflation easing modestly, we expect the Federal Reserve to proceed cautiously, delivering a single rate cut in 2026.