A Wall Street Journal survey of economists this month shows the Iran war’s
economic hit to the U.S. is smaller than earlier feared, but the conflict has
made inflation above the Fed’s 2% target more persistent and narrowed the Fed’s
room to cut rates. Views have shifted markedly since an April survey taken about
a month after the outbreak. Economists now expect U.S. real GDP to grow 2.1% for
the 12 months ending Q4 2026, up from a 2.0% forecast in April. The average
probability of a U.S. recession in the next 12 months fell to 25% from 33% in
April, the lowest since early 2025. Inflation outlooks rose: economists project
12-month CPI through December at 3.4% (vs. 3.2% in April), and core PCE — the
Fed’s preferred gauge — at 3.2% in 2026 (vs. 2.9% previously).
