Our economic outlook for the United States

Strong capital investment has been a key driver of U.S. growth over the past year, and we expect it to remain a principal strength in the year ahead, supporting GDP growth above 2% in 2026. A major contributor is the surge in artificial intelligence-related expenditures, which we estimate will fuel nonresidential investment growth of about 7%.

Tariffs and trade policy effects have been muted by import frontloading, exemptions, and delayed price transmission. The pass-through of tariffs to prices will weigh moderately on growth and slow the pace of disinflation early in the year. We see core inflation peaking at just over 3% before moderating as the year progresses.

Labor markets have cooled sharply, with job creation slowing from over 200,000 positions per month at the end of 2024 to around 50,000 currently. But we estimate that demographic and immigration trends account for 70% of the slowdown, and we see underlying conditions remaining resilient. We expect the unemployment rate to settle around 4.2% by the end of 2026.

In a stronger growth environment and with monetary policy now in the range of neutral-rate estimates, we anticipate the Fed will proceed with greater caution and cut rates only once in 2026, early in the year. (The neutral rate is the interest rate that would neither stimulate nor restrict economic activity.)