Aggressive Fed Rate Cuts Expected in 2024 as Economy Weakens, Unemployment Rises
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The Fed will cut rates more aggressively than expected in 2024, likely over 75 basis points, as the economy weakens and unemployment surpasses 5%, per Pantheon Macroeconomics.
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Rate cuts will exceed what the Fed is currently forecasting due to slower GDP growth, higher unemployment, and lower inflation than central bankers expect.
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Pantheon believes the economy will be weaker through early 2025, driving rapid disinflation, which will warrant aggressive Fed rate cuts later to spur a rebound.
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Markets are already pricing in over a full percentage point of rate cuts by end of 2023, implying cuts will exceed what the Fed has suggested so far.
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More aggressive cuts could signify economic troubles ahead, so they may not be enthusiastically received by markets, per some Wall Street strategists.