S&P Global Ratings’ chief economist Paul Grunwald has predicted that the US economy will slow down in the coming years, leading to multiple rate cuts by the Federal Reserve. According to Grunwald, the Fed may cut rates by 2 full percentage points as inflation cools. In light of this prediction, Jerome Powell has emphasized the Fed’s commitment to continue supporting the economy.
Despite gains in productivity and investment this year, Gruenwald believes that the economy will inevitably slow, prompting the Fed to act to counter rising inflation and return it to its 2% target. S&P Global’s forecast for GDP growth of 2.5% until the end of 2024 includes a projection of slower growth in the second half of the year. The Fed is expected to gradually cut interest rates based on economic indicators and inflation developments.
However, there are risks that could affect this forecast, such as a significant downturn in the labor market leading to higher unemployment. Despite this, Gruenwald remains cautious in his prediction of the Fed’s rate-cutting strategy. This outlook contrasts with some Wall Street analysts who warn that rates could remain elevated for longer due to persistently high prices.
Inflation levels are closely being monitored by economists, along with potential impact of stock market on financial conditions. However, there is a general view that the Fed is likely to continue its path of gradual rate cuts based on economic indicators and inflation developments.
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