Fitch: Expects the Fed to cut rates twice in the first half of the year; unemployment rate likely to remain stable at 4.6% this year.

On January 8, Fitch Ratings raised its 2025 and 2026 US GDP growth forecasts. This adjustment incorporates economic data delayed due to the government shutdown at the end of last year. Fitch now expects 2.1% GDP growth in 2025, higher than the 1.8% forecast in its December 2025 Global Economic Outlook (GEO). At the same time, it raised its 2026 growth forecast to 2.0% from 1.9% in the previous report.

Given the incomplete October data, recent CPI inflation trends are difficult to interpret. Inflation is estimated to rise to 3.0% in December 2025 (from 2.7% in November), and will further increase in 2026, reaching an estimated 3.2% by the end of the year, due to the delayed transmission of tariffs. As the impact of slower job growth is offset by a decline in labor force growth, the average unemployment rate in 2026 is projected to be 4.6%, close to recent levels. We expect the Federal Reserve to cut interest rates twice in the first half of 2026, lowering the federal funds rate (upper limit) to 3.25%. (Jinshi)