Fed Sees Growth in 2026, Trump Unimpressed
After cutting interest rates by 25 basis points on Wednesday, the U.S. Federal Reserve projected faster growth and lower inflation.
Quick overview
- The Federal Reserve aims to ensure a strong economy for its next chair after cutting interest rates by 25 basis points.
- Jerome Powell expressed his desire to hand over a stable economy with controlled inflation and a strong labor market.
- President Trump is dissatisfied with Powell's cautious approach and is considering candidates for the Fed chair who align more closely with his views.
- The Fed projects inflation to decrease to 2.4% and economic growth to rise to 2.3% by the end of 2026, despite current challenges.
The Federal Reserve (Fed) aims to hand over a solid economy to whoever succeeds Jerome Powell as chair.
After cutting interest rates by 25 basis points on Wednesday, the U.S. Federal Reserve projected faster growth, lower inflation, and stable unemployment heading into the 2026 midterm elections. Policymakers also anticipate the economy will move past a period of volatility and disruption driven by tariffs and immigration, transitioning into a year of solid productivity and resilient consumer spending.
“I really want to hand this job to my successor with the economy in great shape—that’s what I want to do,” Fed Chair Jerome Powell said at his post-meeting press conference, following the central bank’s third consecutive rate cut. “I want inflation to be under control, back down to 2%, and I want the labor market to be strong.”
These projections, however, have failed to satisfy U.S. President Donald Trump. Far from endorsing Powell’s cautious approach, Trump believes rate cuts should be carried out far more aggressively. As a result, he has already drawn up a shortlist of potential candidates to lead the Fed, including Kevin Hassett, his top economic adviser, who would be more aligned with his demands.
Still, even if the next chair inherits a solid economy, they will take charge of a policymaking committee that remains unconvinced of the need for substantially looser monetary policy.
Quarterly projections show that inflation is rising faster, interest rates are higher, and economic growth is slower than central bankers had anticipated last September—just before Trump’s election victory in November. Even so, officials expect fears of what some analysts dubbed “light stagflation”—high unemployment alongside high inflation—to gradually fade.
2026 Outlook and Midterm Elections
According to the Fed’s latest projections, inflation is expected to end 2026 at 2.4%, down from 2.9% projected for the end of this year. Economic growth is forecast to accelerate to 2.3%, compared with 1.7% this year—a positive outcome despite the government shutdown that affected the Trump administration. Meanwhile, the unemployment rate, reported at 4.4% in September, is expected to edge slightly higher before ending 2026 once again at 4.4%.
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