Fed’s Future Rate Cuts: A Slowdown Forecast for the US Economy

Chief Economist Predicts 5 Rate Cuts by Fed in 2025 as US Economy Expected to Slow

In a recent statement, Jerome Powell emphasized the Fed’s commitment to supporting the economy. According to S&P Global Ratings’ global chief economist, Paul Gruenwald, the Fed could potentially lower rates up to five times in 2025 due to a slowdown in the US economy. This projection is based on the expectation of a decrease in inflation and a need for rate cuts.

Gruenwald predicts that the Fed will issue three rate cuts in 2024 followed by up to five rate cuts in 2025. Despite a surge in productivity and investment this year, Gruenwald believes that a slowdown in the economy is inevitable. He anticipates that growth will slow down in the second half of the year, bringing inflation back down to the Fed’s target rate of 2%. S&P Global forecasts a GDP growth rate of 2.5% by the end of 2024.

Gruenwald suggests that while there are risks that could lead to more aggressive rate cuts, such as significant increases in unemployment, he still expects the Fed to lower rates gradually. This outlook contrasts with predictions from other Wall Street analysts who are concerned about high prices persisting for a longer period. Increases in consumer prices and potential inflation risks have sparked debate among economists on how the Fed should proceed.

In summary, Jerome Powell has emphasized the Fed’s commitment to supporting the economy, and Paul Gruenwald predicts that rate cuts may be necessary due to an expected slowdown in economic growth and decreasing inflation rates. While there are risks associated with aggressive rate cuts, Gruenwald expects gradual lowering of rates over time.

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