What's Driving U.S. Economic Growth: Fitch's Updated 2025-2026 Outlook

The latest economic projections are in, and they signal a shift in expectations. Fitch Ratings has bumped up its U.S. GDP growth forecasts after incorporating previously delayed economic data from last year’s government shutdown. The new outlook paints a picture of modest but steady expansion ahead.

The Growth Story Gets a Boost

Here’s what changed: Fitch now expects U.S. GDP to grow at 2.1% in 2025, a meaningful jump from the 1.8% forecast released back in December. Looking ahead to 2026, growth is projected to hit 2.0%, up from the earlier 1.9% estimate. While these might seem like small percentage shifts, they reflect a more optimistic view of economic momentum heading into the year.

Inflation Remains the Wildcard

The inflation picture is getting hazier due to incomplete October data, making recent CPI trends tough to read. However, Fitch’s central expectation is that inflation will climb to 3.0% by December 2025, compared to November’s 2.7%. The trajectory doesn’t stop there—inflation could push toward 3.2% by the end of 2026, partly driven by delayed tariff impacts rolling through the economy. For crypto investors watching Fed policy, this is crucial: persistent inflation keeps rate-cut momentum in check.

Jobs and Unemployment: A Balancing Act

Employment growth is showing signs of cooling, which would typically sound concerning. However, the impact may be cushioned by a simultaneous slowdown in labor force growth. The net result? The average unemployment rate is projected to hold steady at 4.6% through 2026, staying close to where it sits today. This stability suggests the labor market won’t be a major drag on economic activity.

What This Means for Interest Rates

Here’s the most market-moving part: the Federal Reserve is anticipated to cut interest rates twice during the first half of 2026. This would bring the upper limit of the federal funds rate down to 3.25%. Rate cuts typically boost risk assets, including cryptocurrencies, so this forward guidance matters.

The bottom line is a resilient but measured expansion—growth picking up, inflation lingering, and policy accommodation eventually coming. For those tracking how macro conditions influence crypto markets, this Fitch outlook suggests stability with gradual policy easing ahead.