With the Federal Reserve (Fed) announcing three times at the FOMC meetings in December to halt interest rate hikes and forecasting a start of interest rate cuts next year, several Fed banks have also provided their economic forecast for 2024.
Table of Contents:
1. The US economy will still face a recession, but it won’t be as severe.
2. Views from several Wall Street banks.
3. Interest rate cuts are a global trend.
The Federal Reserve (Fed) has announced three times at the FOMC meetings in September, November, and December to temporarily halt interest rate hikes, keeping the federal benchmark interest rate unchanged within the range of 5.25% to 5.50%. This has led the market to believe that the most aggressive rate hiking cycle in decades, which began in March 2022, is coming to an end, and the anticipated interest rate cuts are gradually coming into sight.
As the market viewed the positive signals from the proactive monetary policy, Bloomberg reported yesterday (21st) that it compiled the views of Wall Street economists on the US economy in 2024.
The Bloomberg report pointed out that while the Federal Reserve has released dovish signals, pessimists believe that the negative impact of the previous aggressive interest rate policy on the economy will not be absorbed in the short term. For example, consumers’ accumulated savings during the global pandemic face the risk of depletion, and credit pressure and a cooling job market will add pressure to economic development.
Anna Wong, Chief US Economist at Bloomberg, cited the “Beige Book” report released by the Federal Reserve, stating that many economists also believe that the economic recession faced in 2024 will not be as severe as the one during the pandemic in 2020 or as prolonged as the global financial crisis in the early 21st century.
Brett Ryan, Senior Economist at Deutsche Bank, stated when discussing predictions of a mild economic decline:
Sam Bullard, Economist at Wells Fargo, stated that the weakening trend in the labor market will eventually lead to a decline in consumer spending. However, so far, the US economy has shown surprising resilience.
Even Goldman Sachs holds the opposite view of an “economic recession.” Its Chief Economist, David Mericle, expressed optimism:
Image source: Bloomberg
Interest rate cuts are a global trend. On the other hand, central banks of most developed economies around the world also held a series of policy meetings in December, unanimously indicating an end to the aggressive interest rate hike strategies that have dominated the global major economies since 2022. Even developing countries have started cutting interest rates.
Chairman Powell of the Federal Reserve also stated in the FOMC statement released in December:
According to the dot plot, Fed officials expect to cut interest rates four more times in 2025. They believe that it won’t be necessary to mitigate CPI pressure by raising interest rates because by the end of 2023, inflation will slow down to 2.8%, and by the end of 2024, it will drop to 2.4%.
Image source: Fed Dot Plot
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Fed
Interest rate hikes
Economic recession
United States
US economy
Wall Street
Interest rate cuts