US Economics Analyst

Latest edition · October 5, 2026

US Economics Analyst How Will Higher Rates Affect the US Economy

Goldman Sachs estimates that recent interest rate increases will subtract about 0.2 percentage points from US GDP growth in 2027 under their baseline rate-easing path. If current rate levels persist indefinitely, the growth drag would exceed 0.5 percentage points, driven by housing weakness, higher corporate refinancing costs, and mounting fiscal pressures.

This report examines the macroeconomic consequences of elevated US interest rates across residential investment, consumer spending, and business capital expenditures. Under a baseline that assumes a final Federal Reserve rate hike followed by easing in late 2027, the combined growth drag is projected at a manageable 0.2 percentage points in 2027, keeping output near the 2.3% potential trend. Residential investment absorbs the largest hit due to mortgage lock-in effects, while AI infrastructure investments and healthy consumer balance sheets mitigate downside in capex and consumption. However, if interest rates remain at current elevated levels, the GDP drag would more than double, equity gains could stall, and government debt-to-GDP could swell to 132% by 2035.

Key takeaways from the latest edition

• 1.Under the baseline forecast, higher interest rates will subtract approximately 0.2 percentage points from US GDP growth in 2027, allowing expansion close to potential.
• 2.Residential investment faces the sharpest drag, expected to subtract 2pp annualized in 2026Q4 and 1pp in 2027 due to mortgage lock-in and reduced affordability.
• 3.Consumer spending will face a modest 0.2pp drag in 2027 as reduced durable goods demand is partially offset by higher aggregate household net interest income.

What this series covers

• How Will Higher Rates Affect the US Economy?
• Assessing the Impact of Higher Rates on GDP Components
• The Impact on Residential Investment
• The Impact on Consumer Spending
• The Impact on Capex
• A Modest Drag on Growth Under Our Baseline Rates Forecast
• Additional Risks from Higher Rates
• The US Economic and Financial Outlook

Edition archive

• US Economics Analyst How Will Higher Rates Affect the US Economy

  October 5, 2026

• US Economics Analyst September FOMC Preview A Hike Without a Signal

  September 13, 2026

• US Economics Analyst A Hike Without a Signal

  September 13, 2026

• US Economics Analyst Fiscal Sustainability with Higher Rates and Higher Growth

  September 10, 2026

• US Economics Analyst Looking for Pockets of Overheating

  August 30, 2026

• US Economics Analyst What Is AI Investment Crowding Out

  August 10, 2026