Key Takeaways
\nInflation is forecast to cool but remain above the Federal Reserve\u2019s 2% target, raising uncertainty about whether the U.S. can truly achieve a \u201csoft landing.\u201dEconomic 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.<\/p>\n
In recent years, the start of a new calendar year has also been accompanied by concerns about an\u00a0impending economic recession<\/a>; however, most forecasters expect the U.S. to steer clear of an economic downturn in 2026. But whether the U.S. economy sees the \u201csoft landing\u201d<\/a> that some had forecast remains a question.\n<\/p>\n Most economists expect the U.S. economy to grow in 2026, thanks to the effects of the \u201cOne Big, Beautiful Bill\u201d Act<\/a> and increased AI spending. While economic growth is likely to continue, it\u2019s also expected to be uneven, as tariff and immigration policies<\/a> create economic headwinds.\u00a0\n<\/p>\n \u201cThe 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,\u201d Wells Fargo economists wrote in their 2026 outlook.\n<\/p>\n However, inflation is also likely to stay elevated<\/a> above the Federal Reserve\u2019s target of 2%, raising questions about a soft landing in 2026.\u00a0Economists have been looking out for a \u201csoft landing\u201d for the U.S. economy<\/a> after the Federal Reserve began hiking interest rates to tame inflation. The so-called soft landing occurs when inflation returns to the Fed\u2019s target without causing a recession.\n<\/p>\n Why This News Matters<\/p>\n Economists broadly expect the U.S. will avoid a recession in 2026, due to government spending from the \u201cOne Big Beautiful Bill\u201d and increased investment in artificial intelligence. But inflation staying above the Fed\u2019s 2% target raises questions about whether a true soft landing is achievable in the coming year.<\/p>\n Analysts See Range of Outcomes With Government Spending Policy, Tariffs Having an Impact <\/p>\n 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.\u00a0 The Philly Fed\u2019s 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.\n<\/p>\n However, analysts put forth varying economic forecasts for 2026.\u00a0\n<\/p>\n