S&P Global Ratings’ global chief economist, Paul Gruenwald, predicted that the Fed could potentially lower rates up to five times in 2025 in a recent statement. The forecast is based on the expectation of a slowdown in the US economy, which would provide the Fed with an opportunity to make these rate cuts. According to Gruenwald, the US economy cannot sustain its current high level of growth indefinitely and he 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 the US economy will need to slow down eventually, with a forecasted slowdown in the second half of the year. While there are risks that could lead to more aggressive rate cuts, such as a significant increase in unemployment, Gruenwald 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.
