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Federal Reserve To Implement Six Rate Cuts In 2024 Amid Economic Slowdown, Says ING

Published Dec 02, 2023 19:28 Updated Dec 02, 2023 20:40
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© Reuters. Federal Reserve To Implement Six Rate Cuts In 2024 Amid Economic Slowdown, Says ING

Benzinga - by Bibhu Pattnaik, Benzinga Staff Writer.

In light of a decelerating economy, ING Economics is forecasting a series of interest-rate reductions by the Federal Reserve in 2024.

What Happened: This strategic move, involving six rate cuts, is a response to the current economic slowdown, with the first cut expected in the second quarter of 2024 and continuing into 2025.

According to a report by Business Insider, the rationale behind these anticipated cuts stems from a combination of factors, including subdued inflation, a less dynamic job market and a less optimistic consumer spending outlook.

The chief international economist at ING, James Knightley, explained, "We have modest growth and cooling inflation and a cooling labour market — exactly what the Fed wants to see."

Knightley anticipates that the Fed will commence the rate cuts in the next year's second quarter, proposing six reductions of 25 basis points each, amounting to a total of 150 basis points.

Also Read: US Banks Witness Whopping $100 Billion Deposit Drop In Just Three Weeks, Fed Survey Raises Alarm

He also foresees the continuation of this trend into 2025, with an additional four rate cuts of 25 basis points each. This projection contrasts with the futures market, which suggests a 125-basis-point reduction next year.

These cuts are expected to bring the effective Federal Funds rate down to approximately 3.83% by the end of 2024 and to 2.83% by the end of 2025, from the current rate of 5.33%.

Although the rate cuts are designed to stimulate the economy, their impact is typically delayed, often taking between 12 to 18 months to be fully realized.

Knightley's forecast suggests a resilient economy that may avoid immediate drastic cuts to 0%, a measure usually taken in severe economic downturns and recessions.

Regarding the job market, Knightley said, despite its current stability, with weekly jobless claims maintaining a low range around 200,000, it has shown signs of cooling, according to Business Insider. Challenges for consumer spending in 2024 are also anticipated due to stagnant real household incomes, increasing credit card delinquencies and the resumption of student loan payments.

Now Read: Here's How $78 Billion Exited The US Banking System In Just One Week

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo: Shutterstock

© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Read the original article on Benzinga

Federal Reserve To Implement Six Rate Cuts In 2024 Amid Economic Slowdown, Says ING
 

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