Trump administration officials expect the strongest economy in years in 2026. Here’s why.
Top Trump administration officials predict a boom in the U.S. economy in 2026, driven by interest rate cuts from the Federal Reserve and historically large tax refunds.
“This quarter – the first quarter of 2026 – the $30 trillion economy of the United States of America will exceed 5% growth,” Commerce Secretary Howard Lutnick said Wednesday on Fox Business, speaking from World Economic Forum in Davos, Switzerland. By the end of 2026, he added, “you’re going to see 6% growth in the United States of America.”
That would be the fastest economic growth since late 2021, when the economy grew at a blistering 7% annual pace after many businesses began reopening during the pandemic. Aside from a few post-pandemic statistical outliers, economic activity in the United States has historically moved at a much more measured pace, generally averaging between 2% and 3% per quarter on an annualized basis.
As Lutnick pointed out, the U.S. economy could get a boost this year if President Trump appoints new chairman of the Federal Reserve more likely to lower the central bank’s benchmark interest rate, a move that could boost growth. Consumers could also have more money in their pockets thanks to larger tax refunds under the Republican tax and spending law, nicknamed the “big, beautiful bill.”
“It’s possible – I would even say it’s likely on a point-in-time basis,” Mike Skordeles, head of the U.S. economy at financial services firm 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.”
Indeed, a number of economic headwinds will likely persist through 2026 and could dampen any improvements from lower borrowing costs and higher tax refunds, Skordeles said. These include trade tensions resulting from Mr. Trump’s tariffs, as well as trade uncertainty caused by the administration’s economic policy changes.
“These are not positive things for the economy,” Skordeles told CBS News. “One of the reasons we’re not growing faster is uncertainty.”
Truist forecasts economic growth of 2.3% for all of 2026, while other Wall Street economists’ projections vary between 2% and 2.5%.
A White House official noted that Lutnick’s forecast was consistent with the Atlanta Fed’s forecast for fourth-quarter GDP growth of 5.4%.
Risk of overheating
The latest figures for the US economy show a jump in growth, with GDP growing in the third quarter at a faster pace. Annualized rate of 4.3%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 February 20.
Still, there are risks to stimulating the economy through interest rate cuts and larger tax refunds. These same catalysts have contributed to the runaway inflation that has propelled the consumer price index to a 40-year high in 2022.
“What the secretary of state suggested earlier today, to me, it doesn’t unlock a lot of growth — it unlocks a lot of inflation,” Liz Pancotti, managing director of policy and advocacy at Groundworks, a liberal-leaning think tank.
Inflation is still not in line with the Federal Reserve’s target of a 2% annual rate, with December CPI showing prices rose at a faster pace. Annualized rate of 2.7%. Food prices remain high, increasing at a rate annual rate of 3.1% last month due to the sharp rise in prices of staples like beef and coffee.
“This is not a miracle solution: if we simply lowered the [Fed’s interest] rate, it would magically make everything better,” Skordeles said. “You start giving these tax incentives and you put more money in people’s pockets – it’s the classic ‘too much money chasing too few goods’.”
Would workers benefit?
Consumers generally remain pessimistic about the U.S. economy, with recent CBS News Poll finding that Americans want Mr. Trump to focus more on lowering prices.
Although a stronger economy can mean higher wages in many sectors, workers take home a smaller share of the economic pie. Labor’s share of the country’s GDP fell to its lowest level since 1947, falling to 53.8% in the third quarter of 2025, according to Bloomberg News.
Even significantly higher economic growth might do little to ease public frustration over the cost of food, rent and other affordability issues, Pancotti said, citing the example of strong post-pandemic growth under President Joe Biden. As GDP grew at a 7% pace through two quarters in 2021, Americans were more focused on wallet issues such as rising grocery and housing costs, she added.
“Joe Biden had [strong GDP growth]and yet his ratings on the economy were low, given that people want lower prices,” she added. “They want to be able to pay their grocery bills and send their kids to summer camp.”
