Fed Foresees Potential Rate Cuts to Stabilize US Economy Amid Growth Slowdown

S&P Economist Predicts 5 Interest Rate Cuts in 2025 as US Economy Slows

The US economy is expected to experience a slowdown in the coming years, according to Paul Gruenwald, the global chief economist at S&P Global Ratings. This slowdown is predicted to lead to a potential five rate cuts by the Fed in 2025, with a total reduction of two full percentage points over the next 21 months.

Gruenwald believes that the Fed cannot sustain the current pace of growth indefinitely and foresees up to three rate cuts in 2024 before implementing more aggressive rate cuts in 2025. The steeper monetary easing pace is more aggressive than what other economists are predicting.

While there has been a recent surge in productivity and investment, Gruenwald anticipates that inflation will inch closer to the Fed’s 2% target. This justification will give the central bank the excuse it needs to begin cutting rates more significantly.

S&P Global predicts a 2.5% GDP expansion by the end of 2024 but expects growth to slow down in the latter half of the year. Gruenwald emphasizes the importance of gradual rate reductions and suggests that this will be an effective strategy for maintaining economic stability.

Upside risks include a potential increase in unemployment leading to more aggressive rate cuts by the Fed, but Gruenwald still expects gradual reductions. In contrast, some Wall Street forecasters believe interest rates may remain elevated for an extended period due to persistently high prices.

One warning sign is that some economists have predicted that inflation could climb even higher this year, especially as AI-fueled stock market surges may exacerbate financial conditions without any assistance from the Fed.

Overall, Gruenwald’s forecast suggests that while there are some risks involved, gradual rate reductions are likely to be an effective strategy for maintaining economic stability over time.

The US economy is expected to experience a slowdown in the coming years, according to Paul Gruenwald, the global chief economist at S&P Global Ratings. This slowdown is predicted to lead to a potential five rate cuts by the Fed in 2025, with a total reduction of two full percentage points over the next 21…

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