Higher Treasury Yields Could Pressure U.S. Growth and AI Spending

Higher borrowing costs could shave 0.2 percentage point from U.S. growth in 2027 under a baseline outlook, with the drag exceeding 0.5 point if yields remain near current levels, leaving artificial intelligence (AI) investment exposed. Bond yields have climbed to multidecade highs around the world, while U.S. economic growth and equities have so far remained firm. The baseline outlook assumes the Federal Reserve raises rates once more in December 2026, then cuts three times in the second half of 2027. The 10-year Treasury yield reaches 4.4% at the end of 2026 in that scenario, which puts the rate burden on 2027 growth at 0.2 percentage point; if yields stay near current levels, the hit rises above 0.5 point. The same rate outlook carries a fiscal cost. U.S.

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