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Fitch Ratings expects the U.S. federal deficit to narrow next year before resuming an upward trajectory, underscoring what it describes as Washington’s limited progress on fiscal consolidation. The rating agency projects the shortfall will fall to 6.9% of gross domestic product in 2025. After that improvement, Fitch forecasts the deficit will widen again to 7.8% of GDP in 2026 and 7.9% in 2027. The firm said the government has not taken “meaningful action” to address large and persistent deficits, leaving public finances vulnerable to higher interest costs and potential economic shocks. Fitch also anticipates the Federal Reserve will speed up rate cuts in 2026, a move it believes will boost domestic demand in the second half of that year and lift real GDP growth to about 2.1% in 2027.
