Higher borrowing costs may not be enough to bring U.S. inflation under control, according to a survey of corporate economists by Wolters Kluwer. Despite rising interest rates, economists expect economic growth and business investment to remain strong through 2026.
In the survey, 59% of economists said the increase in borrowing costs since August was too small to significantly slow inflation or economic activity.
Inflation remains a major concern. Economists expect the core Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred inflation measure, to rise slightly in the coming months before easing during the second half of 2027. However, they expect inflation to remain above the Fed’s 2% target.
Fed Rate Hikes May Continue
The Federal Reserve raised its benchmark interest rate by 0.25 percentage points in September, bringing it to a range of 3.75% to 4%. The move followed years of inflation remaining above the central bank’s target.
Cleveland Fed President Beth Hammack said maintaining a restrictive monetary policy is important to bringing inflation back to 2%. She also emphasized that making smaller adjustments over time could help the Fed avoid larger policy mistakes.
According to the Wolters Kluwer survey, 84% of economists expect another quarter-point rate increase before 2027.
Business Investment Expected to Remain Strong
Even with higher interest rates, economists raised their forecast for U.S. economic growth in the third quarter to 2.9%. Stronger consumer spending and business investment contributed to the improved outlook.
Business spending is expected to grow at an annual rate of 12.6% in 2026 before slowing to 6.2% in 2027. A significant share of this investment is going toward infrastructure needed to support artificial intelligence, including data centers and related facilities.
All economists surveyed expect AI to initially support economic growth. At the same time, 83% believe its adoption could add to inflationary pressures in the short term.
A separate survey from the National Association for Business Economics also showed a more positive growth outlook. Its panel of economists expects the U.S. economy to grow by 2.1% in 2026, slightly higher than its June forecast.
Economic Risks Are Changing
Economists are becoming less concerned about an immediate economic downturn. Nearly half of the National Association for Business Economics’ survey respondents do not expect the next recession to begin before 2029.
However, concerns about monetary policy decisions are increasing. The share of respondents who identified a potential Fed policy mistake as a major downside risk rose to 18%, more than three times the previous survey’s share.
For the construction industry, continued investment in AI infrastructure could support demand for data centers, power systems and related construction projects. However, persistent inflation and the possibility of further interest rate increases could keep financing costs high and affect the cost of new development.
