Economics

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Economic Outlook

Federal tariff and trade policy is considered the biggest downside risk to economic growth. OSPB expects peak monthly inflation growth to occur at the end of this year when stronger consumer demand allows for additional price pass-through of elevated tariffs. Due to OSPB reporting inflation growth for the consumer price index on an annual average basis, high inflation at the end of this year translates to elevated inflation reported next year, despite weakening demand and monthly inflation growth in 2026. Such timing helps explain how year-over-year reports of elevated inflation can co-exist alongside weakening personal consumption and economic growth, which have downstream implications for weakening corporate profits and labor market. A tailwind to economic growth is H.R. 1, which should stoke additional investments given the tax incentives, all else held equal. However, tariff and immigration policy headwinds are expected to offset those benefits in the near term.