FAVORABLE ECONOMIC OUTLOOK FOR 2026 TOUTED AS FED CUTS RATES

The following information was released by the Association for Manufacturing Technology (AMT):

by Kristin Bartschi

Dec 10, 2025

McLean, Va. (December 10, 2025) After ploughing through an extended drought of official statistics because of the government shutdown, the Federal Reserve cut interest rates by a quarter point for the third consecutive meeting, landing at a target range of 3.5% to 3.75%. In announcing the policy change, Federal Reserve Chair Jerome Powell relayed that their outlook for inflation and unemployment has remained largely unchanged since the October meeting. In what has become an easily anticipated vote since his appointment, Stephen Miran dissented in favor of a larger cut. This time, his dissent was joined by two additional members who favored no change to the policy rate.

Members of the Federal Open Market Committee also compiled their quarterly summary of economic projections for this meeting. Forecasts for 2026 show a strong uptick in expected GDP growth, with the forecast rising to 2.3% compared to the 1.8% forecast in September. Inflation is expected to stay above the 2% target for the next few years, and the unemployment rate is expected to begin a slow downward trend after peaking at 4.5% in 2025.

"Another voice in the chorus predicting an economic uptick in 2026 is a welcome refrain. Machinery orders have already begun to accelerate as we entered the last quarter of 2025 and continued growth as those machines hit shop floors should be a comforting signal for the cutting tool outlook in 2026," said Christopher Chidzik, principal economist of AMT The Association For Manufacturing Technology. "Powell made sure to emphasize in the meeting that the quarter-point cut was not a foray into accommodative territory but simply a move toward the neutral rate. Yet the mounting number of dissents each meeting shows that the path forward is anything but certain as the Fed navigates into 2026 with growing tension between the two sides of their dual mandate."

Stay tuned to the latest USMTO reports to learn what industries are investing in additional capital equipment, and be sure to attend AMT's Winter Economic Forum on Jan. 30 to get the latest outlook for the manufacturing landscape in 2026.