S&P Global U.S. Forecast Update June 2026

June 10, 2026

By Niaoniao You, EBRC Senior Economic Forecaster

Persistent inflation and marginally improved jobs complicate the Fed's rate decision

S&P Global have released their May 2026 forecast update for the U.S. The current forecast is based on the following assumptions:

The forecast includes provisions in the One Big Beautiful Bill Act (OBBBA), which indefinitely extends cuts to marginal personal tax rates enacted in the 2017 Tax Cuts and Jobs Act and adds new deductions for tip income and overtime pay, among other personal tax provisions. The OBBBA includes increased federal direct spending but reduces outlays for Medicaid, ACA insurance premium tax credits, and SNAP benefits. It also introduces new expensing provisions and expanded deductions for businesses and corporations, while rescinding most of the clean-energy tax credits introduced by the Inflation Reduction Act.
This forecast incorporates the existing Section 232 tariffs, along with new Section 232 tariffs of 10% on critical minerals effective in the first quarter of 2027. In the forecast, the replacement of the IEEPA tariffs with Section 122 tariffs lowers the effective statutory tariff rate by about four percentage points. As a result, the forecast assumes that the effective tariff rate converges to approximately 10%.
Deportations, combined with a sharply reduced inflow of immigrants, will lower U.S. aggregate supply and aggregate demand. This forecast assumes net international migration will be reduced, relative to Census projections, by roughly 500,000 per year over the four years of the Trump presidency.
Brent crude oil prices rose to $113 per barrel in the second quarter of 2022, up from $80 in the fourth quarter of 2021. Prices were estimated at $69 in 2025 and are forecast to rise to an average of $116 in the third quarter of 2026, before easing slowly to an average of $103 by the end of 2027.
The Fed left rates unchanged at the April meeting, in line with expectations. With more persistent core inflation and marginally improved labor markets, the Fed is expected to pause until a 25-basis point cut in June 2027. The Fed reaches the long-run “neutral” range of 3.00-3.25% in December 2028.
Real foreign GDP grew 2.1% in 2024 and is estimated at 2.5% in 2025. Growth is expected to slow to 1.8% in 2026 before rebounding to 2.1% in 2027. Foreign CPI inflation slowed to 2.3% in 2025 but is expected to jump back to 3.3% in 2026 before easing to 3.0% in 2027. Foreign sovereign bond yields are projected to average 3.3% over 2026-2027.
Unspent pandemic-era funds, as well as monies authorized under the Infrastructure Investment & Jobs Act (IIJA), mitigated pressures to reduce state and local government spending. States generally remain fiscally sound and are expected to take on a larger share of Medicaid benefits as federal spending is reduced.

The baseline forecast (summarized here) is assigned a 50% probability. The pessimistic scenario is assigned 25%, and the optimistic scenario is assigned the remaining 25%. These probabilities are unchanged from the prior forecast.

After increasing by 2.8% in 2024 and 2.1% in 2025, real GDP growth is forecast to stabilize at 2.1% in both 2026 and 2027. On a quarterly basis, the forecast calls for real GDP to increase through 2036 (no recession).

Headline inflation gradually came down to 2.7% in 2025 since the spike in 2022 to 8.0%. It is forecast to rise again to 3.8% in 2026 due to high energy prices, before falling to 2.8% in 2027.

The unemployment rate started to pick up in 2024 and rose to 4.3% in 2025, from the sub-4% readings in 2022 to 2023 following the peak at 8.1% in 2020. It is forecast to rise to 4.5% in 2026 and 4.7% in 2027 before gradually decreasing.

Nonfarm payroll jobs nationally continued to grow in 2024 and 2025, but at slower pace of 1.2% and 0.5%, respectively, compared to the robust growth previously. They rebounded with jobs growth of 2.9% in 2021, 4.3% in 2022, and 2.2% in 2023, following the 5.8% decline in 2020. Nonfarm payroll jobs are forecast to grow modestly at 0.2% in 2026, before declining 0.1% in 2027.

Housing starts have been moderating in recent years since the surge to 1.61 million units in 2021. Activity remained strong in 2022 at 1.55 million, fell to 1.42 million in 2023, and stabilized at 1.37 million in 2024 and 1.36 million in 2025. They are forecast to edge up slightly to 1.38 million in 2026 before falling to 1.32 million in 2027, as high interest rates and inflation take a toll on housing activity.

Exhibit 1 summarizes the May 2026 forecast from S&P Global. Exhibit 2 shows the April 2026 projections, and Exhibit 3 shows the difference.