AMG Report: U.S. Growth Likely Muddled but Steady Through 2028

AMG has unveiled its latest three-year Economic Outlook, projecting a steady—if unspectacular—path for the U.S. economy through 2028, despite recent turbulence.

The report’s Base Case, dubbed Muddling Through, is the most likely of several possible economic scenarios that could occur in coming years, and it anticipates consistent growth supported by a combination of monetary and fiscal policy measures. For example, the Federal Reserve’s (Fed) recent rate cuts—nearly two percentage points over the past 18 months—are expected to boost both business and residential investment. Meanwhile, the One Big Beautiful Bill Act (OBBBA), with its tax cuts and expanded deductions, could further stimulate consumer spending and business activity. Together, these policies might help balance the labor market and keep economic growth near its potential, estimated at around 2% per year.

Over the next three years, according to the Base Case, GDP growth is anticipated to remain close to this rate, unemployment to stay stable, and household incomes to gradually rise—all fueling consumer spending. Lower interest rates and ongoing advances in artificial intelligence technology could also drive investment. However, the report notes that slower labor force growth—partly due to reduced immigration—might slightly temper the economy’s potential.

On the policy front, the fate of tariffs imposed under the International Emergency Economic Powers Act (IEEPA) remains in the hands of the Supreme Court. AMG does not expect major changes, as the administration is likely to maintain the current tariff regime through alternative legal means.

Inflation is projected to gradually decline, with the Personal Consumption Expenditures (PCE) price index converging toward the Fed’s 2% target by the end of 2026 and remaining stable thereafter. This progress, along with a steady job market, could prompt the Fed to cut rates twice more in early 2026, bringing the federal funds rate to a neutral 3.00–3.25% range before entering a prolonged pause.

Globally, the Base Case anticipates stabilization in major economies. China’s GDP growth should hover around 4% as real estate issues are resolved, though weak domestic demand and resistance to Chinese imports will limit expansion. Advanced European economies are expected to return to their potential growth rate of about 1.5%, aided by fiscal stimulus in Germany and previous rate cuts by the European Central Bank.