According to a recent survey by the National Association for Business Economics, a majority of business economists believe that the U.S. economy may avoid a recession in 2024, despite potential challenges posed by high interest rates.
The survey, which included responses from 38 economists from various organizations including Morgan Stanley and Nationwide, suggests that only 24% see a recession as likely in 2024. This optimism stems from the belief that the Federal Reserve will successfully manage to control inflation through high interest rates without significantly hindering economic growth.
Economists at Morgan Stanley noted that while an increase in unemployment rates is expected, most respondents anticipate it will not exceed 5%. The Federal Reserve’s aggressive interest rate hikes, bringing the main rate above 5.25% from nearly zero last year, aim to curb inflation by making borrowing costlier and cooling off investment prices. Despite these measures, the job market has remained robust, with the unemployment rate maintaining a low 3.9% as of October.
The surveyed economists predict that inflation will continue to slow down in 2024, though it may not reach the Federal Reserve’s target of 2% until the following year. The median forecast expects the consumer price index to be 2.4% higher in the last quarter of 2024 compared to a year earlier, a significant decrease from the over 9% inflation experienced in the summer of 2022. There’s a split among economists regarding when the Federal Reserve might start reducing interest rates, with some expecting the first cut as early as the first quarter of 2024, while others foresee it occurring towards the end of the year.
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