Economic growth this year will outpace previous expectations and the Federal Reserve is likely to achieve a “soft landing” that avoids a recession, leading business economists said in a new survey.
More than 30 economists expect GDP to expand 2.2% this year, significantly from the 1.3% growth expected, according to the monthly survey conducted by the National Association for Business Economics in February and released Monday. It turned out that it was growing. Back in December.
“February's stronger growth outlook for 2024 reflects economic growth, including personal consumption spending, non-residential capital investment, housing investment, government consumption spending and total investment,” said NABE President Ellen Zentner. This is due to upward revisions in major sectors.” Chief U.S. Economist at Morgan Stanley.
Additionally, a majority of economists (76%) said they expected a soft landing this year. A soft landing refers to a scenario in which the Fed is able to reduce inflation through tight monetary policy without sending the economy into recession.
The Fed has been raising interest rates since March 2022, and has raised its target interest rate to 5.25% to 5.50% since pausing rate hikes in July. Higher interest rates reduce inflation by suppressing demand. But many economists worry that if the Fed remains high for too long, it risks pushing the economy into recession.
Economists believe the central bank is aiming to cut rates at some point this year. However, the forecast date for such a move has been postponed in view of recent inflation reports that were a little more severe than expected.
Late last year, the investor consensus was that the first rate cut would likely happen after the central bank's March meeting, but now it appears more likely that it will happen in the second quarter.
Nearly 30% of NABE panelists expect a policy shift to occur after the Fed's April 30-May 1 policy meeting, while others expect the first rate cut to occur after its June meeting. Just over half of them were. Other countries expect policy easing to begin even later.
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That's about the same as investors who also think a June pivot is most likely to occur, according to CME Group's FedWatch tool, which calculates probabilities using short-term market interest rate futures contract prices covered by the Fed. Match.
The Fed's goal is long-term inflation of 2%. Inflation fell three-tenths of a percentage point to 3.1% in the year to January, according to the latest Consumer Price Index report. The report showed less improvement than officials had hoped, as economists had expected inflation to fall to 2.9%.
