Many experts have downgraded the possibility of a US recession next year and believe that the Fed has completed its interest rate hike cycle.

The Wall Street Journal (WSJ) reported that many experts are optimistic about the US economy. They now predict that the US will weather a recession, the US Federal Reserve (FED) appears to have completed its interest rate hike cycle, and inflation will cool.

Specifically, in The Wall Street Journal's latest quarterly survey, economists lowered the likelihood of a US recession next year, from 54% in July to a more optimistic 48%. %. This is the first time they have set the rate below 50% since the middle of last year. The survey included 65 economists, conducted from October 6 to 11. Not all economists answer all questions.


The possibility of the US falling into recession in the next 12 months

BMO economists Doug Porter and Scott Anderson said in the survey: “Recession forecasts in the US have continued to lower as banking sector volatility has subsided, and the labor market has Strong recovery as well as rising real incomes help boost consumer demand.”

Overall, economists predict this year's fourth-quarter GDP (adjusted for inflation) will increase 2.2% from a year earlier. This is a “dramatic” adjustment compared to the 1% growth forecast in the previous survey.

Reportedly, economists have lowered their forecast for next year to 1% from 1.3% in the July survey. However, the economy is expected to continue growing in 2024 and 2025. , the unemployment rate will increase but only above 4% - a historic low.

Nearly 60% of economists say the Fed is done raising interest rates in the current cycle, after increasing the range to a 22-year high in July of 5.25% to 5.5%. About 23% of experts predict the final increase will occur in November and 11% expect it in December.


Survey response: At what meeting do you think the Fed has or will make its final interest rate hike?


About half of the economists participating in the survey expect the Fed to begin cutting interest rates in the second quarter of next year as economic growth cools and the unemployment rate, which was 3.8% in September 2023 - will increase to 4.3% in June 2024.

According to WSJ, many latest forecasts show that more and more people believe that the US economy will have a soft landing. 82% of economists - an overwhelming number - said the Fed's current interest rate range (5.25% to 5.5%) is enough to bring inflation back to the 2% target in two or three next year.

Economists predict September's 3.7% CPI will fall to 2.4% by the end of next year and 2.2% by the end of 2025.

“Over the past few months, the case for a soft landing has undeniably strengthened,” Deutsche Bank economists Brett Ryan and Matthew Luzzetti said in the survey. However, obstacles such as the gradual depletion of people's savings, tightening credit conditions, slowing income growth and the restoration of the student debt payment program will create many challenges in the coming year. ”.

Economists give Fed Chairman Jerome Powell relatively good marks for his handling of monetary policy. Nearly half gave him a B, while 20% gave him an A and 20% a C. Most of their complaints were about the view that inflation will be temporary in 2021 and cause the Fed to start raising money. His slow interest rate.

But on the other hand, the economic picture is not all rosy. Economists warned in the survey that recent developments could cast a shadow on the outlook for the US economy in the coming months, for example energy prices could be affected.

About 81% of economists also said the recent rise in bond yields to a 16-year high has increased the likelihood of a recession. However, they have not really caused any serious impact.

Economists also expect yields to decline in the coming months. On average, they expect the 10-year Treasury yield to be at 4.47% by the end of this year and fall to 4.16% by June 30 next year.

Refer to WSJ

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