The J.P. Morgan economic update from Week 11, 2026 shows a US economy that is still holding up — but facing more pressure right now than it has in a while. US economic growth came in much weaker than expected in Q4 2025, inflation risks keep building from several directions at once, and the Federal Reserve looks determined to sit tight. This same J.P. Morgan economic update also flagged a soft February jobs report and a more complicated path heading into spring.
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J.P. Morgan Economic Outlook Highlights Inflation, Growth & Fed Rates
Growth Data Disappointed
The J.P. Morgan economic update puts Q4 2025 US economic growth at just 0.7% annualized — a sharp downward revision from earlier estimates. A 17% annualized drop in federal government spending drove most of that weakness. Consumer spending also fell to 2% growth, down from 3.5% in Q3 2025, though final sales to private domestic purchasers still managed a decent 1.9% gain. The report points to stronger US economic growth in Q2 and Q3 of 2026, once fiscal stimulus starts feeding through.
On jobs, February’s nonfarm payrolls dropped 92,000, and a further 69,000 jobs also got cut from prior months’ totals. The three-month moving average fell to just 6,000 — down from 50,000 in January — and the unemployment rate ticked up to 4.4% at the time of writing.
Inflation Risks Are Getting Harder to Manage
Headline and core CPI printed at 2.4% and 2.5% year-over-year in February, both hitting expectations — but those readings predate the latest Middle East escalation. The J.P. Morgan economic update sees inflation risks growing on several fronts right now: delayed tariff pass-through, ongoing fiscal stimulus, and a fresh energy shock all point toward a potential spike to 3.5% by mid-2026.
Bruce Kasman, Chief Global Economist at J.P. Morgan, stated:
“U.S. inflation is expected to accelerate above 3% over a year ago as an early-year rebound combines with persistent goods price pressures.”
Federal Reserve Rates On Hold Again
The Federal Reserve held federal reserve rates at a range of 3.50%–3.75% at its March 18 FOMC meeting — the second straight hold. Chair Jerome Powell struck a careful tone at the press conference and made clear the Fed needs to see real progress on inflation before it moves on rates.
Fed Chair Jerome Powell stated:
“The forecast is that we will be making progress on inflation, not as much as we had hoped, but some progress on inflation.”
Powell also added:
“The rate forecast is conditional on the performance of the economy, so if we don’t see that progress, then you won’t see the rate cut.”
The J.P. Morgan economic outlook for 2026 puts federal reserve rates on hold through at least the first half of the year. Governor Miran dissented at the March meeting, voting for a 25-basis-point cut — a sign that a divided Fed could also deliver fewer cuts than markets currently price in, which the J.P. Morgan economic update lists as one of the key risks going forward.
Markets and the Road Ahead
S&P 500 earnings grew 13.3% year-over-year in Q4 2025, with tech driving 61% of that gain. The J.P. Morgan economic update sees solid corporate fundamentals continuing to support US equities, even as inflation risks and geopolitical volatility now sit at the top of the watchlist.
Dollar weakness and regional catalysts also point to strong international performance, and the J.P. Morgan economic update highlights private markets as a growing way to access the AI theme.
