U.S. Growth Outlook Improves, While Inflation Forecasts Rise in Wall Street Journal Survey

A Wall Street Journal survey of economists found that the economic impact of the war with Iran was far below what economists had previously feared, but that inflation had become more persistent and left the Federal Reserve with less room to cut interest rates. According to Jin10, the Wall Street Journal conducted the survey this month and reported that economists’ views shifted notably compared with an April survey taken about one month after the outbreak of hostilities. Forecasters expected the U.S. economy to grow 2.1% this year, based on inflation-adjusted gross domestic product measured from the fourth quarter of 2025 to the fourth quarter of 2026, up from an April estimate of 2.0%. Economists’ average expected probability of a recession over the next 12 months fell to 25% from 33% in April, marking the lowest level since early 2025. At the same time, economists raised their inflation forecasts. They expected the consumer price index to rise 3.4% over the 12 months through December, compared with 3.2% in the April survey. The survey said inflation concerns had overtaken the war-related boost to energy costs. Economists also forecast that the personal consumption expenditures inflation measure excluding food and energy, which Fed officials closely monitor, would rise 3.2% in 2026, above the April forecast of 2.9%.