Slowing Economy: Federal Reserve Forecasts Gradual Interest Rate Cuts through 2025

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

The US economy is predicted to slow down in the coming years, according to S&P Global Ratings’ global chief economist, Paul Gruenwald. This forecast suggests that the Federal Reserve (Fed) could potentially cut interest rates five times by 2025, lowering them by up to two full percentage points as inflation cools.

Gruenwald believes that the Fed will embark on a gradual rate reduction strategy, with three rate cuts expected in 2024 and up to five more in 2025. While other economists are forecasting a slower pace of monetary easing, Gruenwald predicts that the Fed will act quickly to address slowing growth and high inflation.

Despite recent surges in productivity and investment, Gruenwald believes that the US economy cannot sustain its current pace of growth indefinitely. He expects GDP expansion of 2.5% by the end of 2024 but anticipates a slowdown in growth in the latter half of the year. Upside risks include an increase in unemployment leading to more aggressive rate cuts by the Fed, but Gruenwald still expects gradual reductions.

Other Wall Street forecasters believe that interest rates may remain elevated for an extended period due to persistently high prices. However, some economists have warned that inflation could climb even higher this year, especially as AI-fueled stock market surges exacerbate financial conditions without the assistance of the Fed.

Overall, Gruenwald’s forecast suggests that the Fed will take swift action to address slowing growth and high inflation while still maintaining a gradual approach to rate reductions.

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