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S&P Global Ratings’ global chief economist, Paul Gruenwald, predicts that the US economy will slow down in the coming years, leading to multiple rate cuts by the Federal Reserve (Fed). Gruenwald anticipates three rate cuts in 2024, followed by possibly up to five rate cuts in 2025, totaling a two percentage point reduction in interest rates over 21 months.

Despite seeing a surge in productivity and investment this year, Gruenwald believes that the economy will inevitably slow down. He suggests that the Fed may act to counter rising inflation and bring it back to its target of 2%. S&P Global’s forecast of GDP growth at 2.5% by the end of 2024 includes a projection of growth deceleration in the latter part of the year.

While there are risks that could affect this forecast, such as a significant downturn in the labor market leading to higher unemployment, Gruenwald remains cautious in his prediction of the Fed’s rate-cutting strategy. This outlook contrasts with some Wall Street analysts who are warning that rates may remain elevated for longer due to persistent high prices.

Jerome Powell emphasized the Fed’s commitment to continue supporting the economy amidst predictions that the Fed could potentially cut rates five times in 2025. In light of unexpected inflation acceleration in recent months, economists are closely monitoring inflation levels and the potential impact of the stock market on financial conditions. However, generally speaking, they believe that

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