The Congressional Budget Office, a nonpartisan government agency, has taken a fresh look at how the U.S. economy might behave over the next few years. Its new report says the Federal Reserve is likely to start cutting short-term interest rates in 2026 and then let its main rate settle at about 3.4% by the end of President Donald Trump’s term in 2028.
Even though the Fed is expected to cut rates, longer-term borrowing may not feel much cheaper. The CBO thinks the yield on the 10‑year Treasury note will inch up from 4.1% at the end of 2025 to 4.3% at the end of 2028, a move that could keep mortgage rates a bit higher and make home loans slightly more expensive.
The report suggests the job market may soften before it improves. The unemployment rate is projected to rise to about 4.6% in 2026 and then ease back to around 4.4% by 2028, reflecting the effects of Trump’s tax-and-spending law and a smaller number of migrants in the country.
Economic growth is expected to hold up reasonably well. The CBO sees real GDP growth picking up to about 2.2% in 2026, helped by the new tax and spending measures and a rebound from the late‑2025 government shutdown, before slowing to an average of 1.8% in 2027 and 2028 as fiscal support fades and labor force growth cools. Inflation is expected to stay above the Fed’s 2% target for a while, partly because of tariffs and stronger demand, but gradually drift down to about 2.1% by 2028.
The report also touches on a long‑term demographic shift. The CBO now expects the U.S. population to grow by about 15 million people over the next 30 years, which is slower than earlier estimates because of stricter immigration policies and lower expected fertility.
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