Earlier this week, SIFMA published the results of its Mid-Year Economic Advisory Roundtable Survey and held a briefing to discuss the findings. SIFMA’s Economist Roundtable is comprised of the chief U.S. economists from over 20 global and regional financial institutions. The survey assesses the current economic landscape, tariff policy, inflation and monetary policy, the economic outlook, and more.

Here are some of our top takeaways from the report and briefing:

The Economy: Growth Slows, Labor Softens

• Economists now expect slower GDP growth in 2025: The median forecast for real GDP (Q4/Q4) in 2025 is +0.9%, down from +2.5% in 2024 and down 1.0 percentage point from the last survey. Growth is expected to recover to 1.9% in 2026. This downward revision reflects the impact of new tariff policies, tighter monetary conditions, and softer consumer demand. Over 70% of panelists now assign a 30–50% probability of recession within the next 12 months.
• Tariffs and trade policy impact growth: Trade policy and tariffs were ranked as the top factor impacting U.S. economic growth. Panelists do not expect average tariff rates to return to the heights seen on April 2nd nor to cause an outright recession this year or next even though recession risks will remain elevated. However, they do expect tariffs to be an important drag on growth and lead to somewhat higher inflation before year-end, what we referred to as “stagflation “light. This shouldn’t stop the Fed from starting to cut interest rates again this year.
• Labor Market Warning Signs: While the unemployment rate ticked down to 4.1% in June, it is expected to rise to 4.4% by year-end and peak at 4.5% in 2026. Nonfarm payroll growth averaged 147,000 in June, close to the three-month average monthly rate of 150,000 and 12-month average of 151,000 but signs of labor market weakening around the edges are growing. Private sector payroll growth was only 74,000 in June, its weakest performance of the year. Nonfarm payroll growth is expected to slow to around an average 60,000 a month in the second half of 2025. The labor force shrank by over 750,000 over the past two months, driven by stepped-up immigration enforcement and an aging workforce, helping to keep the unemployment rate artificially low. Economists warn that tighter labor supply, combined with ebbing demand, could constrain growth and make the economy more vulnerable to shocks, especially in sectors already facing worker shortages.
• Selective Consumer Spending: Retail sales were down 0.9% in May, reflecting post-tariff frontloading and fading momentum. Real personal consumption expenditures slowed to +2.2% year-over-year. Some economists expect a continued moderation in consumption for the second half of 2025, with the potential for recovery in 2026, if inflation eases. At the same time, U.S. consumer balance sheets and net worth are still considered relatively healthy, household net worth remains high at $160.3 trillion, and the growth rate for household debt has been on the decline since 2022.

Inflation Remains Sticky

• Core Inflation Remains Elevated: Inflation remains sticky, and economists worry that core inflation may remain above the Federal Reserve’s 2% target, especially if potential labor shortages and tariffs push prices higher. The median forecast for Core PCE inflation (Q4/Q4) this year rose to 3.1%, up 0.7 pps from November’s forecast and 0.3 pps from the March flash poll. The top three drivers of inflation: trade policy, inflation expectations, and growth in domestic demand. Panelists expect core inflation to ease back to ~2.5% in 2026 once tariff effects fade and slack builds in the labor market.

Federal Reserve Rate Cut(s) Anticipated this Year

• Fed Cuts Likely on the Horizon: Currently, the Fed Funds rate is at 4.25% to 4.50% after cutting 100 bps in 2024. The Fed is expected to cut rates, but how far and how fast they will go remains uncertain. Given the softer growth and labor market outlook, the Fed may cut the Fed Funds rate at least two times this year with the median expectation looking for a roughly quarter-point cut at the September and December meetings. This year, economists expect the median Fed Funds rate to be 3.926%. Still, Roundtable’s views on cuts diverge widely, reflecting uncertainty about inflation’s trajectory and the Fed’s response. Looking ahead to 2026, the Roundtable’s views on where the Fed Funds rate goes are more varied. The median forecast is for one more quarter-point cut in 2026 though the range varies from zero to five cuts.

Federal Deficits and Debt Concerns Intensify

• Deficit: The U.S. federal deficit now exceeds 6% of GDP, a level historically associated with recessions, wars, or crises.
• Debt: Total public debt is now slightly over 120% of GDP, with annual interest expense exceeding $1 trillion.
• Roundtable sentiment: The Roundtable panel voiced their increasing concern about the size and trajectory of the U.S. deficit and debt and the longer-term damage it could do to economic growth and the cost of financing. The Roundtable ranked their concern about the continuation of uncontrolled fiscal spending as a 7.5 out of 10, with 10 being the most concerned.

Artificial Intelligence (AI) and Productivity:

• Slowing Productivity Growth: After strong gains in 2024, productivity growth slowed in 2025, in part due to the drag from trade disruptions. However, there is optimism that AI and automation could boost productivity and living standards over the next decade—provided gains are widely shared across the workforce.
• Call for Clear AI Regulation: The briefing highlighted the need for a coordinated, national approach to AI regulation to avoid a patchwork of state rules and ensure clarity for firms and investors.

Conclusion

Nearly unprecedented economic policy driven changes in Washington D.C. and our assumptions around them had a bigger impact on the Roundtable’s macroeconomic forecasts than normal. Until the dust settles a bit, especially on tariff policy and rates, the economic and inflation uncertainty they generate will remain a big part of America’s economic and financial future.

For more information on SIFMA Research and the Economist Roundtable, visit www.sifma.org/research.

Author

Scott Anderson, Ph.D., Chief U.S. Economist and Managing Director at BMO and Co-Chair of the SIFMA Economist Roundtable

Related Resources

• SIFMA Research

  US Economic Survey: Mid-Year 2025

• The SIFMA Podcast

  Inside the Numbers: SIFMA’s US Economic Survey, Mid-Year 2025

• Member Briefing

  SIFMA Member Briefing: The US Economic Outlook