Global Chief Economist: US Economy on Track for a Slowdown as Fed Prepares for More Rate Cuts

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

According to Paul Gruenwald, the global chief economist at S&P Global Ratings, the US economy is likely to slow down in the coming years. This prediction comes as Gruenwald anticipates that the Federal Reserve (Fed) could implement up to five rate cuts in 2025, potentially reducing rates by two full percentage points.

Gruenwald believes that the Fed will embark on a gradual rate reduction strategy as inflation inches closer to the central bank’s 2% target. The Fed has already begun cutting rates, and this trend is expected to continue. However, Gruenwald’s forecast suggests that the pace of monetary easing will become more aggressive in 2025.

Despite a current surge in productivity and investment, Gruenwald anticipates that economic growth will slow down. This has led him to predict a 2.5% GDP expansion by the end of 2024 but foresees a slowdown in growth in the latter half of the year. Gruenwald emphasizes the importance of maintaining a steady pace of economic growth for long-term stability.

Upside risks to this forecast include a potential increase in unemployment leading to more aggressive rate cuts by the Fed. However, Gruenwald still expects the Fed to proceed with gradual rate reductions. In contrast, other Wall Street forecasters believe that interest rates may remain elevated for an extended period due to persistently high prices.

Some economists have warned that inflation could climb even higher this year, especially as the recent AI-fueled stock market surge may be exacerbating financial conditions without the assistance of the Fed. Nevertheless, Gruenwald believes that inflation will not significantly impact economic growth or monetary policy decisions.

Overall, S&P Global’s global chief economist suggests that while economic growth may slow down in the coming years, it is essential for policymakers to maintain a steady pace of expansion for long-term stability and sustainability.

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