Today, an analysis revealed that the fiscal package championed by Donald Trump — which includes substantial tax relief and refund checks early next year — is likely to boost economic growth only modestly. The study estimates the legislation will raise GDP by about 0.4 percentage points in the first half of 2026, but only around 0.3 points for the full year.
The reason: the Federal Reserve is expected to keep benchmark interest rates roughly a quarter-point higher than they otherwise would be because of the stimulus-driven momentum and inflation risks. Those higher rates are forecast to offset roughly half of the growth gains from the stimulus package.
In addition, the legislation will raise the federal deficit significantly, adding roughly 0.8 percentage points to GDP again via higher spending on defense and border security. That larger deficit may further weigh on long-term growth and financial stability.
President Trump is voicing frustration with the Fed’s reluctance to cut rates and has openly criticized Fed Chair Jerome Powell, saying he’d like to see him removed. Still, the Fed’s independence and its focus on inflation and employment mean it’s unlikely to shift course solely for political pressure.