Craman Countdown panelists Simeon Hyman and John Wronsky analyze the Federal Reserve's preferred rate of inflation.
The U.S. economy likely ended 2023 on solid footing, but momentum is expected to slow from the start of the year as consumers grapple with high inflation and interest rates.
Economists expect the Commerce Department's first statistics on gross domestic product, the broadest measure of domestically produced goods and services, to reveal the following: the economy expanded In the three months from October to December, it increased at an annual rate of 2%.
This is a significant decrease from the 4.9% figure reported in the third quarter.
Analysts at Bank of America said, “Future data suggests that the U.S. economy is recovering, driven by consumer spending on the back of a tight labor market, better-than-expected holiday spending, and a reasonably strong balance sheet.'' They continue to show that although they have strength, they are cooling off.” Note to clients regarding upcoming GDP releases.
When will the Federal Reserve start cutting interest rates?
A worker polishes welds on a safe being manufactured at Liberty Safe Company in Payson, Utah, March 22, 2022. (George Fry/Getty Images/Getty Images)
Bank of America strategists expect nonresidential capital investment growth to slow and nonconsumer spending to slow starting in the third quarter. Housing is also likely to see only a “slight increase at best'' amid the following headwinds. high mortgage interest rateslow in stock and unaffordable.
Despite experts predicting the Federal Reserve's aggressive interest rate hike campaign would push the economy into recession, the economy has proven surprisingly resilient. However, there are signs that the economy is finally starting to slow down as monetary policy tightens.
Employment growth is slowing. The housing market, which is vulnerable to rising interest rates, has fallen into a long-term slump, and there are signs that personal consumption is cooling down.
Inflation fight faces 'difficult' last mile
Many economists expect the economy to cool further in the coming months as higher interest rates continue to filter through the economy.
People shop at a grocery store in Los Angeles on October 12, 2023. (Tama Mario/Getty Images/Getty Images)
Rising borrowing costs have led to higher interest rates on consumer and business loans. slow down the economy By forcing employers to cut spending.
But optimism is growing wall street The Fed is hopeful it may be able to pull off the elusive soft landing.
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Bank of America, Goldman Sachs and UBS believe the U.S. economy will avoid a recession and could cool if unemployment does not rise significantly next year as a result of multiple Fed rate cuts. It's increasing. At a recent meeting, central bank policymakers decided to cut interest rates by three quarter points in 2024 and lowered their inflation outlook for the coming year.
“We continue to see a soft landing as the most likely outcome for 2024, even though headwinds and risks put the probability of a recession at about 40%,” said Gregory Daco, chief economist at EY. Stated. “Consumers are facing 'cost fatigue' and a weakened labor market and will continue to be cautious with their spending.”
