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The CBO forecasts the US deficit to reach USD 3.115tln in FY36, or 6.7% of GDP, averaging 6.1% from FY27 to FY36

The CBO's projection of a rising US deficit, peaking at 6.7% of GDP by FY36, underscores a significant fiscal trend that could influence investor sentiment and expectations around US fiscal policy.

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The CBO forecasts the US deficit to reach USD 3.115tln in FY36, or 6.7% of GDP, averaging 6.1% from FY27 to FY36

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  • Forecasts FY26 deficit to GDP ratio at 5.8%, same as FY25.
  • Sees FY26 US budget deficit at USD 1.853tln vs USD 1.775tln FY25 deficit.
  • Higher revenue from President Trump's tariffs to reduce deficits by USD 3tln over 10 years. 
Context

The anticipated deficit for FY26 suggests a deterioration versus the previous year, primarily driven by increased spending projections despite higher revenue anticipated from tariff measures. This could impact rates and the USD's positioning, particularly if markets perceive a long-term unsustainable fiscal trajectory.

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