What do independent forecasts (CBO, Moody’s, Wall Street economists) say for inflation and unemployment through 2026?
This fact-check may be outdated. Consider refreshing it to get the most current information.
Executive summary
Independent forecasters expect inflation to trend down toward the Fed’s 2 percent goal by 2026–27 while unemployment drifts modestly higher through 2026, but the magnitude of both moves differs across authoritative forecasts: the Congressional Budget Office projects a modest cooling of inflation and unemployment near the mid‑4 percent range in 2026 (CBO), Moody’s Analytics warns of a sharper rise in unemployment to the high‑4s by the end of 2026 (Moody’s), and a cohort of Wall Street and private forecasters describe “sticky” inflation with unemployment rising only a bit into 2026 (Reuters, Conference Board) [1] [2] [3] [4].
1. The CBO baseline: gradual disinflation and unemployment settling in the mid‑4s
The nonpartisan Congressional Budget Office’s latest projections show inflation easing—PCE inflation falling from about 2.5 percent in 2024 to roughly 2.1–2.2 percent by 2026 and reaching the 2 percent target by 2027—while unemployment rises into the mid‑4 percent area, with the CBO reporting 4.5 percent in Q4 2025 and about 4.2 percent in 2026 under one update and, in a neighboring projection, 4.4 percent by mid‑2026 in an earlier release; CBO explicitly notes slower payroll growth in 2025–26 and expects inflation to ease as labor demand softens [1] [5] [6] [7].
2. Moody’s Analytics: a darker labor market outcome by late 2026
Moody’s public forecasts and commentary from its economists emphasize downside risk to the job market, with Moody’s Analytics projecting unemployment peaking around 4.9 percent by the end of 2026—substantially higher than CBO’s mid‑2026 readings—signaling a view that labor‑market slack could become more pronounced than in many official baselines [2].
3. Wall Street and private forecasters: “sticky” inflation, small uptick in joblessness
Surveys and reporting summarizing Wall Street views and large private forecasters describe inflation as stickier than some models expect and foresee only a modest further increase in unemployment into 2026; Reuters summarized a consensus that unemployment could rise to about 4.5 percent in early 2026 and remain there through the year while the Fed pares rates slowly in response to persistent inflation [3]. The Conference Board and Deloitte add nuance: the Conference Board projects PCE inflation peaking slightly above 3 percent year‑over‑year in H1 2026 before easing to roughly 2.3 percent by year‑end and unemployment rising toward about 4.7 percent in early 2026, while Deloitte’s forecast sees unemployment around 4.5 percent in 2026 and flags risks of a recession if policy and demographic assumptions shift [4] [8].
4. Why forecasts diverge: methodology, policy assumptions and one‑off shocks
Differences among CBO, Moody’s and Wall Street stem from the base assumptions they use—CBO’s projections assume current law and are designed for budget scoring while Moody’s and many private forecasters embed different near‑term scenarios for tariffs, migration, monetary‑policy timing, and household balance sheets; CBO explicitly notes tariffs and reconciliation‑act demand boosts as short‑term influences on goods prices and labor demand, while private forecasters highlight “sticky” inflationary pressures and slower labor‑force dynamics that can push unemployment higher or inflation down more slowly [5] [7] [6] [9].
5. Bottom line and the caveats that matter to policy and markets
The independent consensus is directional: inflation should trend toward the Fed’s 2 percent objective by 2027 even as unemployment rises modestly in 2025–26, but the scale and timing matter—CBO’s mid‑4s unemployment and low‑2s inflation in 2026 are conservative central estimates [1] [6], Moody’s warns of near‑5 percent unemployment by end‑2026 [2], and several Wall Street/private forecasts warn of stickier inflation and unemployment in the mid‑4s to high‑4s in early‑to‑late 2026, with downside risks if tariffs, policy shifts, or migration trends evolve differently than assumed [3] [4] [8]. Forecasts are useful signposts, not certainties; differences reflect alternate views on monetary policy pacing, temporary price shocks, and labor‑force behavior that will determine whether 2026 is a soft landing, a bumpier slowdown, or something closer to the heightened unemployment outcome Moody’s contemplates [7] [2] [3].