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Chief Economist Predicts 5 Rate Cuts in 2025 as US Economy Expected to Slow, Says the Fed

S&P Global Ratings’ global chief economist, Paul Gruenwald, has predicted that the US economy is likely to experience multiple rate cuts in the coming years. He believes that the current hot pace of growth is not sustainable in the long term and expects three rate cuts in 2024, followed by 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 anticipates that the economy will inevitably slow down. He believes that this will prompt the Fed to act to counter rising inflation and bring it back to its target of 2%. According to Gruenwald, 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.

Jerome Powell, Chairman of the Federal Reserve Board (Fed), has emphasized that the Fed remains committed to supporting the economy amidst predictions that it could potentially cut rates five times in 2025. This outlook contrasts with some Wall Street analysts who are warning that rates may remain elevated for longer due to persistent high prices. Despite these risks, economists are closely monitoring inflation levels and stock market performance before making any decisions on rate-cutting strategies.

Inflation acceleration has been unexpectedly high in recent months, leading experts to closely monitor inflation trends and their potential impact on financial conditions. While there are risks that could affect this forecast, such as significant downturns in labor markets leading to higher unemployment rates, Gruenwald remains cautious about his prediction on the Fed’s rate-cutting strategy.

Overall, economic indicators and inflation trends suggest that gradual rate cuts are more likely than sudden changes or increases. However, as experts continue to monitor economic conditions closely, their predictions may be subject to change depending on unforeseen events or developments.

In conclusion, despite concerns about a slowing US economy and rising inflation rates, Jerome Powell has emphasized that the Fed remains committed to continuing its support for businesses and households across America. With experts predicting multiple rate cuts over several years ahead, investors should keep an eye on economic indicators and inflation trends before making any investment decisions.

By Samantha Jones

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