According to S&P Global Ratings’ chief global economist, Paul Gruenwald, the Federal Reserve could potentially cut interest rates up to five times in 2025. The forecast is based on the expectation that the US economy will slow, giving the Fed an opportunity to cut rates amid weakening inflation. This would mean a total reduction in interest rates of 2 percentage points.

Gruenwald believes that despite U.S. productivity and investment having been strong this year, the economy will inevitably slow. He predicts that as growth begins to decline in the second half of the year, the Fed will respond by gradually lowering interest rates. The goal is to maintain a “slower for longer” approach as the economy recalibrates.

The Fed has already indicated that it plans to raise interest rates three times this year, but Gruenwald’s forecast suggests that this pace of monetary tightening may not be sustainable in the long term. He predicts that if inflation continues to decline and unemployment remains low, then rate cuts could become more frequent and aggressive than currently forecasted.

Despite some Wall Street analysts warning of prolonged high interest rates due to stubbornly high prices, Gruenwald’s forecast is in line with expectations that the Fed will continue to gradually cut rates. An unexpected acceleration in consumer prices in February and the potential for inflation to rise further this year pose challenges, but could also provide opportunities for the Fed to intervene. If the labor market weakens significantly and unemployment rises, then rate cuts may have to be more aggressive than currently forecasted.

Overall, Gruenwald’s forecast suggests that while there may be some volatility in interest rates over the next few years, a slower pace of monetary easing is likely on balance. However, unexpected events such as rising inflation or a significant slowdown in economic growth could change these predictions quickly.

In conclusion, S&P Global Ratings’ chief global economist Paul Gruenwald predicts that U.S economic growth will eventually begin to slow down and expects five rate cuts from Federal Reserve by 2025 amid weakening inflation. While there are challenges like stubbornly high prices and labor market weaknesses which can change these predictions quickly but overall he foresees a slower pace of monetary easing over next few years with potential for more aggression if needed

By Samantha Johnson

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