S&P Global Ratings expects a likely downshift in U.S. GDP growth to a 1.6% quarterly average in 2025, according to Economic Outlook U.S. Q2 2025: Losing Steam Amid Shifting Policies.

This comes amid a shifting policy mix that is altering the economic outlook, with the balance of risks to our growth forecast tilted to the downside.

We project the U.S. unemployment rate will drift higher and peak at 4.6% by midyear 2026, with the public sector likely limiting payroll expansion, in contrast to significant contributions to jobs growth in the past two years.

We also forecast inflation will remain closer to 3.0% in 2025 as tariffs increase prices along the domestic supply chain and for end consumers.

As a result, we expect one 25-basis-point federal funds rate cut for 2025, ending the year at 4.00%-4.25%.

This report does not constitute a rating action.