2026 Economic Outlook for Business Leaders

Analysts from across the globe have published their projections for the American economy, and we’ve compiled their responses in several key areas, including a global context. This data provides a clear, concise outlook you can use to adapt your own forecasts and tailor your business decisions heading into 2026.

Global Economic Growth Is Expected to Remain Subdued

The International Monetary Fund [IMF] predicts global Gross Domestic Product [GDP] will rise by 3.2% in 2026. Advanced Economies, including the U.S., are expected to lag this overall growth rate, while Emerging Market and Developing Economies are expected to outperform.

The IMF’s projected GDP growth rate for the U.S. is 2.1%, slightly higher than the FOMC’s forecast of 1.8% growth. Both estimates, however, project a moderate improvement from 2025 to 2026.

The IMF noted that the global economy is in a period of adjustment following new policy measures implemented by governments around the world – notably including tariffs by the U.S. The continued adoption of these policy measures is an important consideration for business, as changes have the potential to cause growth to differ dramatically from the current estimates.

Interest Rates Expected to Decline Modestly

The Federal Reserve has lowered interest rates twice in 2025, bringing the target range of the Fed Funds Rate to 3.75 – 4.00%. An additional rate cut was forecasted for December which would bring the target range to 3.50 – 3.75%, but Chair Powell has said this change is not a foregone conclusion.

The FOMC’s projections show an anticipated Fed Funds Rate of 3.4% at the end of 2026 – signaling one rate cut next year if the 2025 projections are accurate. This would mean stable rates for most of the year.

Futures markets provide a wide range of opinions about the expected number and timing of rate cuts in 2026. The majority of traders, however, forecast lower rates than the Fed’s projections, with the highest concentration of opinions suggesting an end-of-year target range of 3.00 – 3.25%.

Lower interest rates are typically a boon for highly leveraged companies, signaling lower rates for variable loans and more affordable rates for new loans. More favorable borrowing conditions can also spur consumer spending and drive sales of products that typically require financing. On the other hand, companies who have significant cash reserves can see lower returns on their cash portfolios as yields decline.

Inflation Expected to Moderate

The FOMC forecasts that the inflation rate will be 2.6% at the end of 2026. This follows steadily climbing prices throughout 2025, and an anticipated year-end inflation rate of 3.0%.

Despite the projected improvement in 2026, the inflation rate is forecasted to remain above the Fed’s 2% target until 2028. Still, moderation in price increases could help businesses to better manage their expenses in the coming year.

The Labor Market is Forecasted to Remain Relatively Stable

The Fed expects unemployment to rise to 4.5% by the end of 2025, then decline marginally to 4.4% by the end of 2026. Little change from the end of one year to the next suggests steadiness in the job market, which could benefit businesses hoping to stabilize their employment and associated costs.

On employment costs, research from The Conference Board shows that employers plan to increase salary budgets by 3.4% in 2026, the same as 2025. Since the inflation rate is forecasted to be 2.6%, this change shows that employers are planning to spend slightly more on compensation next year in real terms.

The research also shows that businesses are planning to put more of their budgets toward performance-based compensation in 2026, while offering fewer discretionary bonuses. Employers are also planning to increase spending on technology and employee skill acquisition next year.

A relatively stable labor market with higher investment in employee skill could lead to more productivity per employee. This outcome could benefit businesses who are hiring new talent as well as those seeking to create the most value with their current labor.

Stability or Uncertainty? Only Time Will Tell.

Economic forecasts largely show a high degree of stability from the current year through the end of 2026. However, these projections should be met with caution as significant uncertainty remains prevalent throughout the economy.

For example, the Fed’s Beige Book used the word “uncertainty” five times in October, applying it both to the labor market and to overall economic activity. In addition, the IMF and countless analysts have also expressed uncertainty in many of their projections.

The economic results of 2026 will almost certainly deviate from the current projections, and this has historically been the case. However, heightened uncertainty could cause this difference to be even more pronounced than in recent years, so business leaders should pay close attention to new data and adjust their projections accordingly.

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At American Deposit Management, we provide valuable insights for business and banking leaders through weekly articles and banking sector updates. Our publications include analysis of incoming data, coverage of interest rate announcements, and tips for securing corporate cash.

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