May 22, 2024 5:59 pm
Chief Economist Predicts 5 Rate Cuts in 2025 as US Economy Expected to Slow, Says the Fed

Jerome Powell, the chairman of the Federal Reserve (Fed), has emphasized the Fed’s commitment to support the economy amidst predictions that it could potentially cut rates five times in 2025. According to S&P Global Ratings’ global chief economist, Paul Gruenwald, a slowing US economy may give the Fed the opportunity to make these cuts. Gruenwald expects three rate cuts in 2024 and possibly up to five rate cuts in 2025, totaling a two percentage point reduction in interest rates over 21 months.

Despite seeing a surge in productivity and investment this year, Gruenwald believes that the economy will inevitably slow down, prompting the Fed to act to counter rising inflation and bring it back to its target of 2%. S&P Global’s forecast of GDP growth at 2.5% by the end of 2024 includes a projection of growth deceleration in the latter part of the year, with expectations for the Fed to gradually reduce interest rates.

While there are risks that could affect this forecast, such as a significant downturn in the labor market leading to higher unemployment, Gruenwald remains cautious in his prediction of the Fed’s rate-cutting strategy. This outlook contrasts with some Wall Street analysts who are warning that rates may remain elevated for longer due to persistent high prices.

In light of unexpected inflation acceleration in recent months, economists are closely monitoring inflation levels and the potential impact of the stock market on financial conditions. However, the general sentiment remains that the Fed will likely continue its path of gradual rate cuts based on economic indicators and inflation trends.

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