US GDP Set to Accelerate in 2025 While Inflation Pressures Persist

Fitch Ratings has upgraded its economic outlook for the United States, signaling stronger momentum ahead. The rating agency now projects US GDP growth will expand to 2.1% next year—a meaningful revision from its previous 1.8% forecast released in December’s Global Economic Outlook report. Looking further out, 2026 growth expectations have also been lifted to 2.0%, up from the initial 1.9% estimate. These adjustments reflect Fitch’s reassessment following the inclusion of economic data that had been delayed due to government shutdown disruptions.

The uptick in growth forecasts comes as the agency grapples with stubbornly elevated inflation readings. While October’s incomplete data makes current CPI trends difficult to interpret with full confidence, Fitch expects inflation will edge up to 3.0% by year-end 2025—a tick higher from November’s 2.7%. The trend isn’t expected to improve quickly, with the agency forecasting a further rise to 3.2% by the end of 2026, driven largely by delayed effects from tariff implementations that will ripple through the economy over coming months.

On the labor front, employment growth has shown signs of deceleration, yet Fitch expects this headwind will be offset by a decline in labor force participation growth. The agency projects the average unemployment rate will settle at 4.6% in 2026, remaining close to current levels and suggesting the labor market will remain relatively resilient despite softening hiring activity.

Looking at monetary policy, Fitch anticipates the Federal Reserve will move forward with two interest rate cuts during the first half of 2026, with the federal funds rate upper band declining to 3.25% from current levels. This expected easing reflects the Fed’s confidence that inflation pressures will moderate sufficiently to warrant policy accommodation, even as economic growth holds steady.