Source: Sina Finance
Paul Gruenwald (Paul Gruenwald), chief economist at S&P Global Ratings, said that since the US economy cannot maintain rapid growth forever, the Federal Reserve may cut interest rates as many as 5 times next year.
In an interview on Wednesday, Grunwald predicted that the Federal Reserve will cut interest rates three times in 2024 and then up to five times in 2025. This means that the Federal Reserve will lower interest rates by a full two percentage points over the next 21 months, much faster than other economists have predicted monetary easing.
Grunwald said this is because the economy is bound to slow down, despite America's productivity and investment boom this year. In his view, the economic slowdown will more clearly return inflation to the Federal Reserve's 2% price target, which gave the Federal Reserve officials the green light to start cutting interest rates seriously.
Although S&P expects US GDP to grow by 2.5% in 2024, the company expects growth to decline in the second half of this year. Grunwald said that once the economy slows down, the Federal Reserve will be prepared to start cutting interest rates “at a slower pace over a longer period of time.”
“America must slow down,” he added. “This is actually our prediction; we have to slow down a bit in the second half of this year, at some point.”
There are some upside risks to this forecast. Grunwald said that if the labor market “collapses” and the unemployment rate soars, the Fed may eventually cut interest rates more aggressively than expected, although he still expects the Fed to cut interest rates gradually.
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