US Macro: FAQs to Forecasts

Latest edition · August 27, 2026

Markets and economy en 1665646

UBS projects US GDP growth to remain near trend at approximately 2% in the second half of 2026, driven by AI capital expenditures and wealth effects. With disinflation progressing gradually and fiscal deficits remaining high, the Federal Reserve is expected to keep rates on hold until mid-2027.

In this US macroeconomic update, UBS forecasts solid near-trend US GDP growth of ~2% for 2H 2026, driven by AI capex, wealth effects from equity markets, and fiscal support, which offset drags from higher energy prices and subdued real wage growth. July core CPI slowed to 2.5% and core PCE stood at 3.3%, with tariff-related price pressures peaking at 60–100 bps. Given resilient growth and gradual disinflation, UBS expects the Federal Reserve to remain on pause through 2026, initiating interest rate cuts only in mid-2027. Meanwhile, structural fiscal deficits of 6.0–6.5% of GDP and rising debt-servicing costs continue to push term premia and long-term Treasury yields higher.

Key takeaways from the latest edition

• 1.US GDP growth is projected to remain near trend at ~2% in 2H26, supported by tax cuts, AI capex, and equity wealth effects despite fading fiscal stimulus.
• 2.The Federal Reserve is projected to remain on hold throughout 2026, with interest rate cuts unlikely to commence before mid-2027.
• 3.AI investment is adding ~50 bps to US GDP growth and firm adoption is ~20%, but it is also exerting upward pressure on software and financial service inflation.

What this series covers

• Macro outlook: Solid 1H growth, 2H near trend as Fed stays on hold
• Growth: Multiple drivers are enough to offset negative oil impact
• Oil: Prices could weigh on growth, but starting conditions were strong
• Tariffs: Trade policy effects are expected to taper
• Labor: Labor demand and supply are trending weaker
• Labor: Limited changes in the no-hire, no-fire labor market
• Consumption: Remains solid, aided by wealth effects and tax cuts
• Investment: Stronger PMIs show investment may broaden out more
• Inflation: Core and headline disinflation continued in July
• Rates: Fed to watch and wait in 2026, but new Chair adds uncertainty
• 10 US Economy FAQs
• Rates: What is the Fed watching? Lower core inflation and stable expectations are key to avoiding hikes.
• Productivity: What are US productivity trends? Business output per hour growth is over 1pp above the recent decade trend
• AI: How quickly are US businesses adopting AI?
• AI: Where is AI showing up in labor market data?
• AI (cont.): How is AI affecting core inflation trends?
• Consumption: Are spending signals showing oil headwinds?
• Consumption: What's driving the K-shaped consumer theme?
• Investment: How is the breadth of investment evolving? Durable goods orders and IP show broadening beyond tech
• Inflation: How are the drivers of service inflation trending? Softer wage trends are consistent with 2% inflation
• Inflation: How much are tariffs contributing to elevated PCE inflation?
• Fiscal policy: What is the deficit outlook? Despite low unemployment, rising interest expense contributes to the deficit staying near 6-6.5% of GDP
• Fiscal policy: How does the debt outlook contribute to higher yields? Fiscal pressures and other factors are weighing on bond valuations.
• Global asset class preferences definitions
• Appendix

Edition archive

• Markets and economy en 1665646

  August 27, 2026

• Markets and economy en 1663776

  July 22, 2026

• Markets and economy en 1662446

  June 26, 2026