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2026 Stress Testing Scenario Summary

NCUA’s supervisory stress test (SST) consists of baseline and severely adverse scenarios, which regulation requires the NCUA to provide by February 28 each year. As in past SST exercises, the NCUA’s 2026 SST scenarios follow the domestic scenarios published in the 2026 Stress Test Scenarios document released on February 4, 2026, by the Federal Reserve Board of Governors (FRB) for use in FRB’s stress testing of large banks.

The near-term portion of the baseline scenario is similar to the January 2026 consensus projections from Blue Chip Economic Indicators and Blue Chip Financial Forecasts. The scenario’s long-range forecast is comparable to the October 2025 Blue Chip releases. The 2026 severely adverse scenario is characterized by a hypothetical severe global recession triggered by an abrupt decline in risk appetite that causes substantial declines in the prices of risky assets, declines in risk-free interest rates, and high levels of financial market volatility. These scenarios follow the FRB’s Policy Statement on the Scenario Design Framework for Stress Testing and do not represent forecasts of the NCUA or the FRB.

A summary of each scenario follows:

Baseline Scenario - The baseline scenario for the United States features moderate economic growth.

  • Real GDP growth rises modestly from 1.9 percent in the first quarter of 2026 to 2.1 percent by the first quarter of 2027 and hovers around that rate for the rest of the scenario.
  • The unemployment rate moves up to 4.6 percent in the first quarter of 2026, and stays at that level through the third quarter of 2026, before gradually declining to 4.2 percent by the end of the scenario.
  • Inflation, measured as the quarterly change in the CPI and reported as an annualized rate, gradually declines from 2.8 percent at the end of 2025 to 2.2 percent in the first quarter of 2028, where it remains through the end of the scenario.
  • The 3-month Treasury rate decreases from 3.7 percent at the end of 2025 to 3.1 percent in the fourth quarter of 2026, and hovers around that level through the remainder of the scenario.
  • The 10-year Treasury yield hovers around 4.1 percent, its value in the fourth quarter of 2025, for the duration of the scenario.
  • The prime rate follows a path similar to short-term interest rates, but sits at a level 3 percentage points higher, reflecting the typical spread between the prime rate and the top of the federal funds target range.
  • Mortgage rates decline gradually from 6.2 percent at the end of 2025 to 5.7 percent by the third quarter of 2028 where they remain for the rest of the scenario.
  • Corporate bond yields rise gradually from 5.1 percent in the fourth quarter of 2025 to 5.6 percent in the fourth quarter of 2027 and remain at that level through the end of the scenario.
  • Equity prices increase between about 4 and 5 percent per year throughout the scenario. Equity market volatility, as measured by the U.S. Market Volatility Index (VIX), declines from 26 percent in the fourth quarter of 2025 to 22 percent in the second quarter of 2026, after which it gradually increases to 25 percent by the end of the scenario.
  • Nominal house prices increase gradually for the duration of the scenario, while commercial real estate prices increase between 4 and 5 percent per year.

Severely Adverse Scenario – The severely adverse scenario is characterized by a hypothetical severe global recession triggered by an abrupt decline in risk appetite that causes substantial declines in the prices of risky assets, declines in risk-free interest rates, and high levels of financial market volatility.

  • Real GDP declines 4.6 percent from the fourth quarter of 2025 to its trough in the second quarter of 2027, before recovering to the level at the jump-off.
  • Unemployment increases and peaks at 10 percent in the third quarter of 2027, a 5.5 percentage point increase relative to its fourth-quarter 2025 level.
  • Inflation, measured as the quarterly change in the CPI and reported as an annualized rate, falls from 2.5 percent at the end of 2025 to 1.0 percent in the fourth quarter of 2026, and then gradually increases to above 1.3 percent by the end of the scenario.
  • Short-term Treasuries fall significantly from 2.5 percent at the fourth quarter of 2025 to 0.1 percent by the second quarter of 2026 and remain there for the remainder of the scenario.
  • The 10-year Treasury yield falls from 3.1 percent at the fourth quarter of 2025 to 2.3 percent by the fourth quarter of 2026, and then gradually starts to rise in the second quarter of 2027 to 2.7 percent by the end of the scenario. The slope of the yield curve steepens at the beginning of the scenario and remains that way over the remainder of the scenario horizon.
  • Equity prices fall about 58 percent in the first three quarters of the scenario while the VIX spikes and reaches a peak of 72 percent in the second quarter of the scenario.
  • Those conditions also lead to a widening in corporate bond spreads to a level of 5.7 percentage points.
  • The sharp decline in economic activity leads to a collapse in real estate prices, including a 30 percent decline in nominal house prices and a 39 percent decline in commercial real estate prices as compared to Q4 2025 levels.