Trump administration officials expect the strongest economy in years in 2026. Here's why.
Senior Trump administration officials are forecasting a boom for the U.S. economy in 2026, driven by Federal Reserve interest rate cuts and historically large tax refunds.
"This quarter — the first quarter of 2026 — the United States of America's $30 trillion economy will exceed 5% growth," Commerce Secretary Howard Lutnick said on Fox Business on Wednesday, speaking from the World Economic Forum in Davos, Switzerland. By the end of 2026, he added, "You're going to see 6% growth from the United States of America."
That would mark the fastest economic growth since late 2021, when the economy grew at a blistering 7% annual pace after many businesses started reopening during the pandemic. Outside of a few post-pandemic statistical outliers, economic activity in the U.S. has historically moved at a far more measured pace, typically averaging between 2% and 3% per quarter on an annualized basis.
As outlined by Lutnick, the U.S. economy could get a lift this year if President Trump appoints a new Federal Reserve chair more inclined to lower the central bank's benchmark interest rate, a move that could spur growth. Consumers could also have more money in their pockets from larger tax refunds under the Republicans' tax and spending law, dubbed the "big, beautiful bill."
"It's possible — I would say it's even likely on a one-off basis," Mike Skordeles, head of U.S. economics at financial services company Truist, told CBS News of Mr. Lutnick's forecast. But he added that maintaining that growth for a full year is "a really tough hill to climb."
That's because a number of economic headwinds are likely to persist into 2026 and could blunt any lift from lower borrowing costs and larger tax refunds, Skordeles said. Those include trade tensions stemming from Mr. Trump's tariffs, as well as business uncertainty driven by the administration's shifting economic policies.
"Those are not positives for the economy," Skordeles told CBS News. "One of those reasons why we're not growing faster is uncertainty."
Truist forecasts 2.3% economic growth for all of 2026, while projections by other Wall Street economists range from 2% to 2.5%.
A White House official pointed out that Lutnick's forecast is in line with the Atlanta Fed's forecast for fourth-quarter GDP growth of 5.4%.
Risk of overheating
The latest readings on the U.S. economy show a jump in growth, with third-quarter GDP expanding at a 4.3% annualized rate, according to recent government data.
On Tuesday, Treasury Secretary Scott Bessent said the economy is "likely accelerating," citing an analysis from the Federal Reserve Bank of Atlanta's GDPNow tool that pegs fourth-quarter GDP growth at 5.4%. The Commerce Department will announce fourth-quarter growth data on Feb. 20.
Yet there are risks to boosting the economy through interest-rate cuts and bigger tax refunds. Those same catalysts contributed to the searing inflation that drove the Consumer Price Index to a 40-year high in 2022.
"What the secretary was intimating earlier today, to me, that doesn't unlock a bunch of growth — it unlocks a bunch of inflation," Liz Pancotti, managing director of policy and advocacy at Groundworks, a liberal-leaning think tank.
Inflation still isn't down to the Federal Reserve's goal of a 2% annual rate, with the December CPI showing that prices rose at a 2.7% annualized rate. Food prices remain elevated, rising at an annual pace of 3.1% last month due to sharply higher costs of staples like beef and coffee.
"It's not a single silver bullet that if we just lowered the [Fed's interest] rate, it would make everything magically better," Skordeles said. "You start giving these tax incentives, and you put more money in people's pockets — it's the classic 'too many dollars chasing too few goods'."
Would workers benefit?
Consumers remain generally dour about the U.S. economy, with recent CBS News polling finding that Americans want Mr. Trump to focus more on lowering prices.
"Lower-income households have experienced weaker wage growth in 2025, while inflation has steadily eroded their checking and savings balances," analysts with PNC Economics Research said in a report this week.
While a stronger economy can translate into higher wages in many industries, workers are taking home a smaller slice of the economic pie. The labor share of the nation's GDP slid to its lowest point since 1947, dropping to 53.8% in the third quarter of 2025, according to Bloomberg News.
Even sharply higher economic growth might not do much to assuage public frustration with the cost of food, rent and other affordability issues, Pancotti said, pointing to the example of the strong post-pandemic growth under President Joe Biden. While GDP grew at a 7% pace for two quarters in 2021, Americans were more focused on pocketbook issues such as higher grocery and housing costs, she added.
"Joe Biden had [strong GDP growth], and yet his marks on the economy were low, given that people want lower prices," she added. "They want to be able to afford their grocery bills and send their kids to summer camp."