Our economic outlook for the United States
May 11, 2026
A constructive outlook with a close eye on inflation
“Inflationary pressures have remained elevated early in the year, while the Federal Open Market Committee’s bias to ‘look through’ recent price pressures appears to have narrowed.”
Josh Hirt,
Vanguard Senior U.S. Economist
The U.S. economic outlook remains constructive, supported by continued strength in business investment and generally resilient household demand. That said, energy prices have remained elevated. We’d need to see some near-term moderation for recent economic trends to continue.
We continue to view the labor market as fundamentally resilient, albeit transitioning toward a slower growth phase. Heavily concentrated job creation in health care continues to reflect structural demand in health care services, a trend we expect to persist over the coming years. We continue to see AI‑related displacement as a limited risk in 2026.
Inflation has remained stubbornly elevated early in the year, prompted by continued pass-through of tariffs and early energy-spike effects from the Middle East conflict. We expect elevated non‑housing services inflation to moderate in the months ahead. Should that remain sticky, it will be difficult for core inflation to fall below 3% this year.
For now, continued conflict in the Middle East and high energy prices will bias the Federal Reserve toward inaction, although elevated inflation will keep the central bank vigilant to potential changes in inflation expectations. We retain our expectation for a single policy rate cut in 2026, consistent with where we anticipate a narrowed and slim bias of the Federal Open Market Committee to remain.
United States economic forecasts
Notes: GDP growth is defined as the fourth-quarter-over-fourth-quarter change in real (inflation-adjusted) GDP in the forecast year compared with the previous year. Unemployment rate is as of December 2026. Core inflation is the year-over-year percentage change in the Personal Consumption Expenditures price index, excluding volatile food and energy prices, as of December 2026. Monetary policy is the rounded midpoint of the Federal Reserve’s target range for the federal funds rate at year-end.
Source: Vanguard.
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