The U.S. economy is expected to slow in 2026 as geopolitical tensions, persistent inflation and elevated interest rates continue to weigh on growth, according to the latest Credit Union Trends Report from TruStage.
TruStage economists lowered their forecast for U.S. gross domestic product growth to 1.9% in 2026, down from a previous projection of 2.4% and below the 2.1% growth recorded in 2025. The revision reflects the economic fallout from the closure of the Strait of Hormuz, which the report said has disrupted global supplies of oil, natural gas, fertilizers and other industrial materials. Those supply shocks are expected to increase costs for businesses and consumers while dampening economic activity worldwide.
Inflation is forecast to rise to 3.0% in 2026, above the 2.7% pace seen in 2025 and well above the Federal Reserve's 2% target. Rising food and energy costs, tariff-related expenses and ongoing wage pressures are expected to keep inflation elevated. As a result, TruStage expects the Federal Reserve to maintain its benchmark federal funds rate at 3.6% throughout the year.
The report projects unemployment to remain relatively stable at approximately 4.5% in 2026. However, job growth is expected to slow significantly, with nonfarm payrolls increasing by an average of just 50,000 jobs per month.
Meanwhile, long-term interest rates are expected to remain elevated, with the 10-year Treasury yield hovering around 4.25%. TruStage said large federal budget deficits and higher borrowing costs will likely keep 30-year mortgage rates near 6.4%, leaving the housing market operating roughly 20% below normal activity levels.
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