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The Federal Reserve may potentially lower interest rates up to five times in 2025, according to Paul Gruenwald, the global chief economist at S&P Global Ratings. This forecast is based on the expectation of a slowing US economy and cooling inflation, which would allow the Fed to cut rates amidst a decline in growth.

Gruenwald believes that despite strong productivity and investment in the US this year, the economy will inevitably slow down. He projects that as growth declines in the second half of the year, the Fed will respond by gradually lowering interest rates. The aim is to maintain a “slower-for-longer” approach as the economy recalibrates.

The unexpected acceleration of consumer prices in February and the potential for inflation to rise further this year present challenges, but could also provide opportunities for the Fed to intervene. If the labor market weakens significantly and unemployment rises, the Fed may need to cut rates more aggressively than currently anticipated. However, Gruenwald’s forecast aligns with the expectation of Fed continuing to cut rates gradually as long as inflation remains under control and economic growth does not pick up too quickly.

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