S&P Global Forecasts US Economy Slowdown, Fed Rate Cut Projections.

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

The US economy is predicted to experience a slowdown in the next two years, according to S&P Global Ratings’ global chief economist Paul Gruenwald. This forecast suggests that the Fed may cut rates by 2 full percentage points as inflation cools.

Gruenwald believes that the current pace of growth cannot be sustained indefinitely and anticipates that the Fed will implement three rate cuts in 2024 followed by up to five rate cuts in 2025, resulting in a total reduction of two full percentage points over the next 21 months. This prediction of a steeper monetary easing pace is more aggressive than what other economists are forecasting.

Despite a current surge in productivity and investment, Gruenwald expects the economy to slow down significantly. He believes that this will lead to inflation getting closer to the Fed’s 2% target, providing justification for the central bank to begin cutting rates more aggressively.

According to S&P Global, GDP expansion is expected to be around 2.5% by the end of 2024. However, Gruenwald predicts that growth will slow down in the latter half of the year. He emphasizes the importance of this slowdown and suggests that the Fed will embark on a gradual rate reduction strategy.

There are some risks associated with this forecast, including an increase in unemployment leading to more aggressive rate cuts by the Fed. However, Gruenwald still expects gradual rate reductions, while other Wall Street forecasters believe interest rates may remain elevated for an extended period due to persistently high prices.

In contrast, some economists have warned that inflation could climb even higher this year due to AI-fueled stock market surge without assistance from Fed intervention.

Overall, S&P Global’s global chief economist believes that monetary policy will continue its aggressive stance with further rate cuts over the next few years as inflation cools and economic growth slows down significantly.

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