CHICAGO, September 25, 2026 – Business spending is about to carry the economy. Consumer spending, however, will remain strong. According to bank economists, the key to economic growth is business investments in the construction of data centers and related infrastructure.
In a new report, the Economic Advisory Committee of the American Bankers Association issued its quarterly outlook in September 2026: growth will stay steady through 2026-Q4 to 2027-Q2, despite high inflation persistently exceeding the Fed’s target rate of 2%. The committee comprises top economists from major banks in North America. It forecasts that real GDP will grow at 2.7% in 3Q 2026, 2.2% in 4Q 2026 and 2027-Q1.
Translation: no recession in sight. But no quick victory over price pressures, either.
Members believe the core personal consumption expenditures price index (core PCE inflation), which is preferred by the Fed and excludes food and energy prices, will reach 3.3% during the fourth quarter of 2026 before moving lower but staying high at 2.4% in 2027. This forecast assumes that West Texas Intermediate crude prices average $90 per barrel during the fourth quarter of 2026 before falling next year.
“Economic growth and labor market conditions remain resilient enough to withstand underlying inflation pressures,” said Beth Ann Bovino, the committee’s chair and chief economist at U.S. Bank. She pointed to slower labor-force growth from demographic shifts, which has lowered the “breakeven” pace of hiring needed to keep the market balanced.
And this is an important factor. The committee expects productivity to improve up to around 2% in the coming year and thereby keep the unemployment rate steady at 4.2% together with the growth of the economy.
Following the increase in the fed funds rate last week, the committee anticipates one more rise in the fourth quarter of 2026, and then nothing in 2027. However, with continued inflation, the committee does not rule out the possibility of future increases if needed.
Here’s where it gets messy for households: housing.
The interest rates on mortgages are anticipated to continue being higher than 6.7% for the coming one-year period, while the prices of houses are predicted to be up by 1.8% in 2027. The residential investment is likely to remain low due to the mortgage lock-in effect on existing homeowners.
“While the labor market and broader demand are intact, housing is expected to remain under pressure,” Bovino said. Inventory might improve as some owners finally list, but broader affordability challenges will still dampen sales activity.
Conversely, business fixed investment receives an upgrade, with expectations of a 6.7% increase during the second half of 2026 and a further 4.5% increase in 2027 due to data center investments and associated IT equipment. This is an old story in 2026: the demand for AI, cloud services development, and the race for compute power is pulling investment into bricks-and-servers faster than other industries.
No one argues about smooth sailing. The elevated level of inflation has been a challenge for several years now; the view of the committee is that it should moderate, but it will not disappear. The labor market remains balanced despite slower workforce growth; any shock to hiring is likely to reveal itself in the labor market statistics very soon.
The message for the policymakers is clear: keep the economy growing without reigniting inflation. The message for the households is tougher: higher borrowing rates, slower housing turnover, and a balanced labor market at best.
Should productivity continue to grow and oil prices remain stable, the outlook is manageable. Otherwise, that additional rate hike can mark the beginning of a prolonged detour.
