Economic Outlook - April 2026
- The Federal Open Market Committee (FOMC) voted to keep the federal funds rate target range steady at 3.50% – 3.75% in March. The FOMC statement described growth as “solid” and did not make an immediate assessment on the impact of the ongoing military conflict in Iran, simply stating that implications of developments in the Middle East for the U.S. economy are “uncertain.” While acknowledging risks to both sides of the Fed’s dual mandate of maximum employment and stable prices, the Fed is likely to look through any near-term energy price increases – similar to last year’s trade shock – and instead monitor for lower housing services inflation, a decline in goods inflation as tariffs roll over, and more moderate inflation in core services ex-housing. Since the last meeting in January, hiring trends have generally remained weak and growth has moderated, but firings remain low. While near-term measures of inflation have risen, longer term expectations remain consistent with the stated 2% target. The median “Dot Plot” still indicates the possibility of one rate cut later in 2026; however, it was noted that due to the aforementioned near-term inflation concerns and economic uncertainty, the risk of a rate hike has increased.
- The U.S. Bureau of Economic Analysis reported a significant downward revision for Q4 2025 real GDP growth to 0.7%, lower than previous estimates of 1.4% and much slower than 4.4% growth reported in Q3; however, the data has been viewed as largely transitory, owing in large part to the extended government shutdown. The Atlanta Fed’s GDP Now tracker estimates growth for Q1 2026 to rebound to 2.7%, and the FOMC’s latest Summary of Economic Projections reflects a growth forecast of 2.4% for calendar year 2026, 2.3% in 2027 and 2.1% in 2028. The median projections further forecast core Personal Consumption Expenditures (PCE) of 2.7%, 2.2%, and 2.0% and an unemployment rate of 4.4%, 4.3%, and 4.2% from 2026 – 2028, respectively. The median long run projection for the Fed Funds Rate drifted up to 3.125%, up from 3% in March 2025, the highest median estimate by the committee since 2016.
- Gains in housing prices continue to cool, with the S&P Cotality Case-Shiller Index rising 0.9% in the twelve months through January, down from 1.1% year-over-year growth in December. January also marked the eighth consecutive month that the Consumer Price Index outpaced home price growth.
- The March Job Openings and Labor Turnover Survey (JOLTS) showed job openings decreasing by 358,000 to 6.882 million openings as of the end of February, while the reported hiring rate fell to 3.1%, its lowest level since 2020. In other economic news, the average price for a gallon of gas hit $4.02 on March 31, though for context, Energy Department data show current prices are still well below June 2022, when prices reached $5 per gallon in the midst of the oil shock from the Russia-Ukraine war. While higher gas prices are concerning, it is worth noting that based on analysis of data from the Energy Information Administration (EIA), the share of disposable income that Americans spend on fuel is significantly lower than during the price peaks of 2008. On balance, consumer sentiment held steady in March with the Conference Board reporting sentiment rising to 91.8, up from 91 in February and significantly above March consensus of 87.5.
Sources: FactSet, Dow Jones Publishing, Bloomberg, Bureau of Labor Statistics, S&P Global, U.S. Bureau of Economic Analysis, Commerce Department, U.S. Federal Reserve
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