The Federal Reserve Is Expected To Cut Interest Rates 6 Times in 2024

Big changes may be on the horizon for the US economy, and two major economic forecasts have different takes on what lies ahead.

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First, ING Economics predicts that the Federal Reserve will cut interest rates six times in 2024, starting in the second quarter. Why? Well, they're seeing signs of the US economy slowing down, and they believe the Fed will take action to keep things on track. James Knightley, ING's chief international economist, thinks these rate cuts will total 150 basis points and continue into 2025 with at least four more cuts.

On the other hand, UBS Global Wealth Management has a more optimistic view. They don't foresee a recession in 2024, but they do anticipate some challenges. Solita Marcelli, UBS GWM's investment chief Americas, points to potential headwinds like higher rates, resuming student loan repayments, and other factors affecting the US consumer. However, UBS believes that the strong job market, healthy household and business balance sheets, and solid investment spending will prevent a significant recession.

UBS's economists also highlight the importance of monitoring the savings rate. If it gradually increases, we might have a smooth economic landing. But if it jumps suddenly, it could push us into a recession. Brian Rose, a senior economist at UBS, emphasizes that the economy's foundation heavily depends on what happens to the savings rate.

Moreover, UBS expects fading inflation to provide relief. They predict core price growth to slide to 2-2.5% in 2024, allowing the Federal Reserve to make two interest rate cuts next year. This could ease pressure on households and lead to modest earnings growth for corporations.

However, there's a global risk: geopolitical conflicts in Ukraine and Israel. If things worsen on that front, the US might be pulled into a global recession. So, buckle up for potential volatility.

Amidst all this, ING's Knightley points out that the gradual rate cuts he predicts are a good sign. It suggests the economy will remain resilient, and the Fed won't need to resort to drastic measures immediately. Knightley emphasizes the cooling job market and potential challenges for consumer spending in 2024.

In conclusion, both forecasts acknowledge potential challenges but differ in severity. ING is preparing for significant rate cuts to tackle the economic slowdown, while UBS remains cautiously optimistic, counting on a solid job market and controlled inflation to keep things steady. As we head into 2024, keep an eye on these economic indicators – they might just shape the future of the US economy.