A new forecast from TruStage says U.S. economic growth is expected to slow modestly in 2026 while declining interest rates help revive credit union lending.

The latest economic forecast from TruStage suggests the U.S. economy will continue to grow in 2026, though at a slightly slower pace, while credit union lending is expected to regain momentum as interest rates gradually decline.

The outlook comes from the company’s quarterly Credit Union Trends Report, which provides a snapshot of economic conditions and their potential impact on the credit union industry. The report is published by Steven Rick, chief economist at TruStage.

According to the forecast, U.S. real gross domestic product is expected to expand by 2.4% in 2026, compared with 2.8% growth in 2025, though still above the long-term trend rate of roughly 2%.

The report attributes the continued expansion to several factors, including expansionary fiscal policy, somewhat less restrictive monetary policy, deregulation and significant investment in artificial intelligence infrastructure such as data centers.

Inflation, however, is expected to remain stubbornly above the Federal Reserve’s target. TruStage forecasts 2.5% inflation in 2026, down slightly from 2.7% in 2025.

Rick said persistent price pressures could stem from tariffs being passed on to consumers and a slow-growing labor force that continues to put upward pressure on wages.

Because inflation is expected to remain elevated, the Federal Reserve is likely to keep monetary policy somewhat restrictive for much of the year, though modest easing is anticipated. TruStage expects the central bank to lower the federal funds rate by 25 to 50 basis points in 2026, bringing it closer to what economists consider the neutral rate of about 3%.

Labor market conditions are also expected to soften slightly. The unemployment rate is projected to rise to 4.6% by the end of 2026, while job growth slows to about 50,000 new positions per month.

That pace represents what the report describes as the new “breakeven” level needed to keep the unemployment rate steady, reflecting slower growth in the labor supply caused by immigration restrictions and deportations.

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Interest rates on longer-term borrowing are expected to remain relatively high. The report forecasts the 10-year Treasury yield will hover around 4.2% in 2026, partly due to a large federal deficit projected to exceed $2 trillion, or roughly 7% of gross domestic product.

Mortgage rates are expected to remain elevated as well, with the 30-year mortgage rate averaging around 6.4% if credit spreads remain near historical norms.

For credit unions, the report suggests lending activity could begin to recover after a slow period.

Loan balances at credit unions typically grow about 7% annually over the long term, but are currently rising at only about 3% due to high interest rates, large loan repayments and economic uncertainty.

TruStage forecasts credit union loan growth will increase to 5.5% in 2026 and 6.5% in 2027 as short-term interest rates decline and repayments from the surge in auto lending in 2022 begin to slow.

Historically, falling interest rates have provided a strong boost to credit union lending. The report notes that a five-percentage-point drop in the federal funds rate has historically increased credit union loan growth by about 3.5 percentage points, typically with a two-year lag.

The easing of monetary policy, Rick said, is intended to help move lending growth back toward normal levels while allowing inflation to fall gradually without triggering a recession — a scenario economists commonly describe as a soft landing.

“As short-term interest rates fall another 50 basis points in 2026, and auto loan repayments from the 2022 auto loan boom slow, we are forecasting credit union loan growth to rise to 5.5% in 2026, and 6.5% in 2027.”

Steven Rick
Chief Economist
TruStage