S&P Global’s global chief economist, Paul Gruenwald, has suggested that the US economy will inevitably slow down in the coming years. This, coupled with rising inflation and a desire to bring it back to the target of 2%, is likely to prompt the Fed to act and potentially cut rates multiple times in 2024 and 2025.

Jerome Powell, the Fed chairman, emphasized the Fed’s commitment to continue supporting the economy amidst predictions that rates could potentially be cut five times in 2025. While Gruenwald predicts 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. This is due to concerns about rising inflation and its impact on financial conditions. 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.

In light of unexpected inflation acceleration in recent months, economists are closely monitoring inflation levels and their potential impact on financial conditions. However, despite this concern, there is general sentiment that the Fed will likely continue its path of gradual rate cuts based on economic indicators and inflation trends.