S&P Global Predicts Federal Reserve Rate Cuts and Economic Growth Slowdown in Coming Years

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 expected to slow down in the coming years, leading to a potential cut in interest rates by the Federal Reserve. Gruenwald anticipates that the Fed could 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 suggests that the Fed may lower rates by 2 full percentage points as inflation cools.

S&P Global foresees a 2.5% GDP expansion by the end of 2024 but expects growth to slow down in the latter half of the year. Gruenwald emphasizes the importance of gradual rate reductions and suggests that this will help sustain economic growth over time. However, 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 assistance from the Fed.

Despite a current surge in productivity and investment, Gruenwald believes that economic growth cannot be sustained forever. As a result, he predicts that inflation will inch closer to the Fed’s 2% target, providing justification for more aggressive rate cuts. Other Wall Street forecasters believe that interest rates may remain elevated for an extended period due to persistently high prices. However, Gruenwald still expects gradual rate reductions and warns against too aggressive monetary policy actions.

In conclusion, S&P Global predicts that interest rates could be cut five times in 2025 due to slowing economic growth and cooling inflation. While some economists expect more aggressive rate cuts and higher inflation, others warn against too much monetary policy action. It remains to be seen how much impact these predictions will have on investors and businesses moving forward.

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