The Federal Reserve acknowledged a significant increase in economic uncertainty, both on the upside and the downside, in a report released February 12, 2026. The assessment, detailed in a Federal Reserve note, comes as the U.S. Economy navigates ongoing policy uncertainty and the potential disruption of artificial intelligence.
According to the report, real economic uncertainty (REU) experienced a substantial jump at the onset of the COVID-19 pandemic in 2020 and remained elevated for several years. The current increase is decomposed into upside and downside components, reflecting a broader range of potential economic outcomes. This assessment aligns with observations from Stanford University’s SIEPR, which noted the U.S. Economy has demonstrated resilience despite these challenges.
Experts at the World Economic Forum have similarly observed that uncertainty is increasingly acting as an independent economic factor, impacting global economic trends. This sentiment underscores the complexity of current economic forecasting and policy-making.
The SIEPR report highlights several key issues expected to dominate the economic landscape in 2026, including interest rate decisions, the national debt, and the potential for a stock market bubble. Affordability concerns for consumers are too expected to remain a central theme. Morgan Stanley anticipates that the 10-year Treasury yield could fall to 3.75% by mid-2026, potentially bringing mortgage rates down to between 5.5% and 5.75%, contingent on their economic forecast and monetary policy outlook.
Jared Bernstein, a Distinguished Policy Fellow at SIEPR and former Chair of the Council of Economic Advisers under President Biden, contributed to the Stanford report. Ryan Cummings, Chief of Staff at SIEPR, and Neale Mahoney, the Trione Director of SIEPR, also authored the analysis. Erika McEntarfer, a Research Scholar at SIEPR and former Commissioner of the Bureau of Labor Statistics, provided additional expertise.
The IMF has long studied the economic impact of uncertainty, focusing on concepts like “real options” – the idea that companies evaluate investments as a series of choices, factoring in potential risks and rewards. This framework provides a lens for understanding how businesses respond to fluctuating economic conditions.
As of February 22, 2026, the Federal Reserve has not announced any immediate policy changes in response to the increased uncertainty, and is scheduled to meet again in March to reassess economic conditions.
