Key Takeaways
Inflation is forecast to cool but remain above the Federal Reserve’s 2% target, raising uncertainty about whether the U.S. can truly achieve a “soft landing.”Economic growth may start strong in early 2026 but could slow later in the year as tariffs rise and immigration tightens, even as the risk of a full recession appears limited.

In recent years, the start of a new calendar year has also been accompanied by concerns about an impending economic recession; however, most forecasters expect the U.S. to steer clear of an economic downturn in 2026. But whether the U.S. economy sees the “soft landing” that some had forecast remains a question.

Most economists expect the U.S. economy to grow in 2026, thanks to the effects of the “One Big, Beautiful Bill” Act and increased AI spending. While economic growth is likely to continue, it’s also expected to be uneven, as tariff and immigration policies create economic headwinds. 

“The improved outlook reflects a more supportive fiscal policy environment, a less restrictive monetary policy setting, and a tariff regime that is not characterized by near-constant escalation as it was this year,” Wells Fargo economists wrote in their 2026 outlook.

However, inflation is also likely to stay elevated above the Federal Reserve’s target of 2%, raising questions about a soft landing in 2026. Economists have been looking out for a “soft landing” for the U.S. economy after the Federal Reserve began hiking interest rates to tame inflation. The so-called soft landing occurs when inflation returns to the Fed’s target without causing a recession.

Why This News Matters

Economists broadly expect the U.S. will avoid a recession in 2026, due to government spending from the “One Big Beautiful Bill” and increased investment in artificial intelligence. But inflation staying above the Fed’s 2% target raises questions about whether a true soft landing is achievable in the coming year.

Analysts See Range of Outcomes With Government Spending Policy, Tariffs Having an Impact

A Philadelphia Federal Reserve survey of 33 forecasters found that the average economists expect U.S. gross domestic product to grow at a rate of 1.8% in 2026.  The Philly Fed’s review also found that inflation, as measured by the Personal Consumption Expenditures price index, was likely to show price increases slowing to a 2.6% annual rate in the 2026 fourth quarter.

However, analysts put forth varying economic forecasts for 2026. 

For example, JPMorgan expects economic growth in the first half of 2026 to be around 3%, primarily driven by the stimulus effects from the OBBBA, but then slowing to between 1% and 2% growth in gross domestic product later in the year. Over that time, inflation is expected to fall from over 3% to near 2% by the end of 2026, approaching the Fed’s target inflation rate and fitting within the “soft landing” definition.

“Both economic growth and inflation should heat up in early 2026 due to OBBBA impacts. Thereafter, however, higher tariff levels and lower immigration will cause growth to slow and inflation to cool,” JPMorgan wrote in its 2026 investment outlook.

Softening Labor Market Could Help Lower Inflation

Wells Fargo wrote that “2026 would mark a directional improvement, with the softer labor market, well-anchored inflation expectations and the prospect for some tariff relief next year helping lead inflation lower.”

And while economists may not see a recession coming in 2026, the public isn’t so sure. The predictions market website Polymarket is showing a 35% chance of a recession by the end of 2026.