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

Today

By Niaoniao You, EBRC Senior Economic Forecaster

Fed now expected to hike rates to contain inflation

S&P Global have released their September 2026 forecast update for the U.S. economy. The GDP growth forecasts in the next two years were revised up to reflect higher equity values, stronger momentum in equipment investment, and a weaker U.S. dollar. The weaker currency reduces imports because import prices are higher and thus increases net exports. The major change from prior forecast lies in monetary policy. S&P Global now expects the Federal Reserve to raise its policy rate by 25 basis points at the September meeting, based on faster growth, lower unemployment, higher core inflation, and substantial credibility of its independence.

Real GDP growth is forecast to stay at 2.1% in 2026 before picking up to 2.5% in 2027 and 2.4% in 2028, compared to 2.1% in 2025. On a quarterly basis, the forecast calls for real GDP to increase through 2036 (no recession).

Headline CPI inflation is forecast to rise to 3.2% in 2026 due to high energy prices, before easing to 2.3% in 2027 and 2028. It had previously come down to 2.7% in 2025 from the spike in 2022 to 8.0%.

The unemployment rate is forecast to stay at 4.3% in 2026 and 2027. It started to pick up in 2024 and rose to 4.3% in 2025, compared to the sub-4% readings in 2022 to 2023 following the peak at 8.1% in 2020.

Nonfarm payroll job growth is forecast to decelerate to 0.3% in 2026, before edging up to 0.4% in 2027 and 2028. Nonfarm payroll jobs grew 1.2% in 2024 and 0.5% in 2025, compared to the more robust growth previously.

Housing starts are forecast to change little at 1.36 million in 2026 before decreasing to 1.32 million in 2027, as affordability and demographic trends take a toll on the housing market. 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.

The baseline forecast (summarized above) 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.

The current forecast is based on the following assumptions:

Monetary policy: The Fed left rates unchanged at the July meeting, in line with expectations. With faster growth, lower unemployment, and higher expected core inflation, the Fed is forecast to raise the target range for the federal funds rate by 25 basis points at the September meeting. The Fed is expected to resume easing in September 2027, reaching the long-run “neutral” range of 3.00-3.25% by June 2028.
Oil prices: Brent crude oil prices were $78 in 2026Q1, and $97 in 2026Q2. They are forecast to average $88 per barrel in 2026, staying there in 2027, before easing slightly to $81 in 2028.
Federal fiscal policy: The forecast includes the direct effects of the partial government shutdown that ended November 12, 2025, and 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.
Population: 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.
Tariffs and trade: 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 4 percentage points. As a result, the forecast assumes that the effective tariff rate converges to approximately 10%.
Global outlook: Real foreign GDP was estimated to grow 2.5% in 2025, before slowing to 2.2% (1.8% in prior forecast) in 2026 and rebounding to 2.4% in 2027. Foreign CPI inflation was estimated at 2.4% in 2025 and is expected to land at 2.7% in 2026 and 2.6% in 2027. Foreign sovereign bond yields are projected to average 3.3% over 2026-2027.

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