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Fed’s Global Chief Economist Predicts Potential Rate Cuts Up to Five Times in 2025: What It Means for the US Economy

Chief Economist Predicts 5 Rate Cuts by Fed in 2025 as US Economy Expected to Slow

Fed’s Global Chief Economist Predicts Potential Rate Cuts Up to Five Times in 2025: What It Means for the US Economy

S&P Global Ratings’ global chief economist Paul Gruenwald has predicted that the Federal Reserve (Fed) could potentially lower interest rates up to five times in 2025. The projection is based on the expectation of a slowdown in the US economy, which would give the Fed the opportunity to make these rate cuts.

In a recent statement, Jerome Powell emphasized the Fed’s commitment to supporting the economy. However, Gruenwald believes that the US economy cannot sustain its current high level of growth indefinitely and anticipates that the Fed will issue three rate cuts in 2024 followed by up to five rate cuts in 2025.

Despite a surge in productivity and investment this year, Gruenwald believes that a slowdown in the economy is inevitable. This will likely bring inflation back down to the Fed’s target rate of 2%, paving the way for rate cuts. S&P Global forecasts a GDP growth rate of 2.5% by the end of 2024, but with growth expected to slow down in the second half of the year.

Gruenwald suggests that while there are risks that could lead to more aggressive rate cuts, such as a significant increase in unemployment, he still expects the Fed to lower rates gradually. This outlook contrasts with predictions from other Wall Street analysts who are concerned about high prices persisting for a longer period. Increases in consumer prices and potential inflation risks have sparked debate among economists on how the Fed should proceed.

Overall, it seems that while there is disagreement among economists on how long high prices will persist and what action policymakers should take, most experts believe that some form of monetary policy intervention is necessary to support economic growth and maintain price stability.

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