Event Recap: Highlights from the 2026 WBA Midwest Economic Forecast Forum

Banking leaders and community members from across the upper Midwest gathered virtually on January 14 for the 2026 Midwest Economic Forecast Forum, an annual event hosted by the Wisconsin Bankers Association (WBA), Illinois Bankers Association, Michigan Bankers Association, Minnesota Bankers Association, Montana Bankers Association, North Dakota Bankers Association, and South Dakota Bankers Association. The event helps viewers prepare for the upcoming year. This year’s forum welcomed two nationally respected voices: Neel Kashkari, president and CEO of the Federal Reserve Bank of Minneapolis, and agricultural economist Dr. Dave Kohl.

Rose Oswald Poels, WBA president and CEO, moderated the conversation. Both speakers addressed the unfolding economic landscape of the new year defined by resilient consumer spending patterns, lingering inflationary pressures, a shifting labor market, and a heightened uncertainty tied to global trade.

Kashkari: A Resilient Economy with Fragile Undercurrents

Kashkari described an economy that continues to outperform expectations despite restrictive monetary policy.

“Overall, the economy seems quite resilient,” Kashkari expressed, noting that higher interest rates have not slowed growth as dramatically as anticipated. Consumer spending remains strong, particularly among higher-income households, and large-scale investment into artificial intelligence data centers are fueling the economic momentum of 2026.

Kashkari cautions that other economic indicators remained mixed. Inflation is trending downward, but still remains above the Federal Reserve’s 2 percent target, while the labor market is “gently cooling” rather than outright weakening. Hiring has slowed, yet layoffs are limited and unemployment hovers around the mid 4 percent range — a tricky balance that complicates policy decisions under the Fed’s dual mandate of stable prices and maximum employment.

Kashkari unpacked tariffs and their effect on Midwest manufacturers and agricultural producers. He emphasized that headline tariff rates kicked up a lot of attention in 2025, but the overall economic impact has been muted by businesses rerouting their supply chains, exemptions, and delayed cost pass-through. However, Kashkari warned that tariffs may still pose longer-term inflation risks as businesses reestablish prices and the higher cost of goods gradually ripples through the broader economy.

“If inflation remains elevated for long enough, people may begin to doubt how serious we are about returning to 2 percent,” Kashkari explained regarding the Fed’s commitment to its inflation goal. “I’m here to say, emphatically, that 2 percent is our target.”

Oswald Poels prompted discussion on housing affordability in Wisconsin. Kashkari stressed that the biggest barrier for the housing market is supply, and the most meaningful long-term solution lies in zoning and regulatory reform. He also acknowledged rising insurance and tax costs — pressures that many bankers see reflected in borrower balance sheets — as a significant contributor to strained household budgets.

Kashkari also addressed the burgeoning risks of artificial intelligence adoption. He noted that AI is already showing the capacity to improve productivity, at the cost of restrained hiring. It is important to monitor how data center expansion will affect local power and electricity prices.

“AI could be resoundingly good for the U.S. economy,” Kaskari explained. Productivity improvements are what drive higher standard of living for societies and economic competitiveness.”

Kohl: Volatility, bifurcation, and strategy

The forum’s second speaker, Dr. Dave Kohl, delivered a candid, no-holds-barred outlook on the U.S. and global economy through 2026 and beyond, discussing macroeconomic analysis through the lens of agriculture and rural markets.

Kohl draws on decades of research and firsthand engagement across the country, noting that he touched down in 30 states during 2025 alone. He emphasized that the U.S. is marked by bifurcation, with a widening chasm between the value of assets and day-to-day financial reality.

“Paper wealth is increasing,” he noted. “However, we’re experiencing cash flow and financial liquidity issues in businesses and households.”

Kohl described an economy where wealth and income are increasingly concentrated in a smaller percentage of people, with lower-income individuals bearing the consequences of elevated costs most intensely. That imbalance, he explained, mimics what bankers are seeing across both rural and urban communities.

Kohl also shed light on the heightened uncertainty driven by global trade dynamics and shifting economic alliances. Sanctions and tariffs are disruptions that are reshaping how businesses compete.

To illustrate how these forces are influencing the economy ahead, Kohl introduced his cast of characters — Alice, Henry, and Herman — who represent different groups of people who will be affected differently by the  turbulent conditions ahead.

Alice, Kohl explained, is asset-limited, income constrained, but fully employed.

“They represent less than 5 percent of spending, but they’re a large part of the numbers in our economy,” he described. “They’re running up credit card debt and consumer debt.

The most vulnerable individuals make up the Henry group. They’re high earners, but not rich yet, Kohl explained.

“These folks carry a lot of university debt. They haven’t been in the stock market long enough to build paper wealth appreciation,” he continued. “They can’t get into the real estate market because they’re priced out.

Herman makes up the upper part of the K-shaped economy. This group represents individuals who are high earners with appreciated net worth.

“They’re only 10% of the population, but 49.8 percent of consumer spending. They’ve benefited from the wealth affect.”

For banks, Kohl encouraged business leaders to stay informed about these economic trends and maintain financial discipline.

Looking Ahead to 2026

WBA’s annual Midwest Economic Forecast Forum once again provided context and clarity to bankers and community members on how this year’s economy may unfold. Both speakers emphasized the persistent challenges with inflation and labor constraints, and an overarching message to proceed through the year with informed caution.