U.S. Outlook to 2026

Price Watch

Updated: August 26, 2022  

Man holding a bag of groceries in front of an escalator and looking at a receipt; Wall Street sign and tall buildings Man holding a bag of groceries in front of an escalator and looking at a receipt; Wall Street sign and tall buildings Man holding a bag of groceries in front of an escalator and looking at a receipt

Is the U.S. economy about to slip into recession over the near term? The signs are certainly ominous, as stock markets have been trending downward and consumer confidence has slipped over the past few months. The Federal Reserve (Fed) is determined to bring inflation back down from current levels of around 8.0 per cent to its target of 2.0 per cent and has started to aggressively increase the key federal funds rate.

High inflation is closely linked to the pandemic, which disrupted global supply chains; the massive stimulus implemented by the federal government; and the war in Ukraine, which has led to surging prices for commodities like oil and wheat. Central bankers have little control over supply-side inflation but are compelled to act to ensure that consumers and firms believe that inflation will eventually pull back.

  • Overview
  • Aggregate Demand
  • Financial Markets
  • Fiscal Policy
  • Labour Markets

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Key findings

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The U.S. economy is expected to expand by 2.4 per cent this year and 2.1 per cent next year, down sharply from our Spring outlook.

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This downturn is primarily a result of much higher interest rates linked to the persistence of high inflation.

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We expect inflation to moderate in the latter part of 2022, but the war in Ukraine adds significant uncertainty to the outlook.

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Tight labour markets could both help and hurt policy-makers’ attempts to tighten monetary policy without driving the economy into recession.

Previous releases

War’s Impact on the U.S. Minimal … but So Much Could Go Wrong

Russia’s invasion of Ukraine is taking a huge human toll. It has been deeply disturbing to watch unfold. There are many different scenarios for how the war will go over the next few months—some worse than others. Our baseline view is that the Russian army will not extend its war beyond Ukraine’s border and that disruptions to the world supply of natural gas and oil will be limited and temporary.

Impact paper  |  20-min read
April 29, 2022