What do independent forecasts say about U.S. GDP and inflation trajectories over the next two years under current policies?
Executive summary
Independent forecasters broadly agree that U.S. growth will be modest but positive over the next two years, with near‑term GDP projections clustering roughly between about 1.8% and 2.5% for 2026 and slowing or flattening thereafter depending on the model; inflation is expected to fall closer to—but in many forecasts remain slightly above—the Fed’s 2% goal by 2027, though estimates for 2026 range from near 2.1% up to about 3.1% because of tariff and demand effects [1] [2] [3] [4].
1. Growth: a consensus of “modest expansion,” not a boom
Most independent forecasts see 2026 as a year of modest positive GDP growth rather than a recession or a boom: the Philadelphia Fed’s Survey of Professional Forecasters puts annual‑average real GDP at about 1.8% in 2026 (after 1.9% in 2025) [1], the Congressional Budget Office’s baseline projects about 1.8% growth in 2026 in its longer outlook [5], and several pro‑market houses—including Vanguard and Goldman Sachs—expect somewhat stronger outcomes, with Vanguard forecasting growth above 2% in 2026 [6] and Goldman projecting a Q4/Q4 expansion of 2.5% in 2026 versus a 2.1% consensus [2].
2. Inflation: a wide band in 2026, convergence toward target by 2027
Forecasters diverge on 2026 inflation largely because of how aggressively they expect tariffs and cost pass‑through to hit prices: Goldman anticipates core PCE falling to about 2.1% by December 2026 [2], the CBO projects PCE inflation around 2.4% in 2026 and back to 2.0% in 2027 [3], Morningstar expects inflation to tick up to about 2.7% in 2026 as tariff effects flow through [7], and Deloitte’s scenario sees CPI averaging about 3.1% in 2026 with core PCE elevated through 2028 under its tariff pass‑through assumptions [4]. The Federal Reserve’s own median SEP projection sits near 2.5% for 2026, implying the Fed sees an intermediate path back toward 2% but not immediately [8].
3. Why forecasters split: tariffs, investment, and the labor market
Variation across forecasts reflects three clear drivers cited by forecasters: lingering tariff pressures that push goods prices higher and slow disinflation (CBO, Deloitte, Morningstar) [3] [4] [7], unusually strong capital investment—especially AI‑related spending—that lifts potential output and supports above‑trend growth in some scenarios (Vanguard, Deloitte, Goldman) [6] [4] [2], and a shifting labor supply picture (including lower immigration and policy‑driven demand changes) that affects unemployment and wages and therefore both growth and inflation (Goldman, CBO) [2] [3].
4. Where risks lie—balanced but asymmetric
Analysts explicitly flag sizable upside and downside risks: tariff reductions, faster than expected diffusion of productivity‑enhancing AI, or stronger consumer spending could lift growth toward the higher end of forecasts (Goldman, Deloitte, Vanguard) [2] [4] [6], while sustained tariff pass‑through, weaker hiring or a sharper fade in post‑legislative demand boosts could slow activity and keep inflation stickier than expected (CBO, Morningstar, Conference Board) [3] [7] [9]. The Fed’s own SEP emphasizes wide confidence bands around central projections—meaning policymakers and markets should expect substantial uncertainty even if medians converge [10].
5. The bottom line for policy and markets
Under current policies, the cross‑section of independent forecasts points to growth that is positive but modest in 2026 and likely to slow or normalize by 2027, with inflation moving closer to target over that window but remaining above 2% in many models during 2026 mainly because of tariffs and demand effects; the exact path depends critically on tariff pass‑through, the persistence of investment‑led growth, and labor‑market dynamics, leaving policymakers with tradeoffs between supporting growth and ensuring full disinflation [1] [2] [3] [4].