Federal Reserve Set to Cut Interest Rates Multiple Times in Coming Years, Says S&P Global Ratings’ Global Chief Economist

S&P Global Ratings’ global chief economist, Paul Gruenwald, has predicted that the Federal Reserve (Fed) will cut interest rates multiple times in the coming years due to a slowing US economy. Gruenwald anticipates 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, prompting the Fed to act to counter rising inflation and bring it back to the target of 2%. S&P Global’s forecast of GDP growth at 2.5% by the end of 2024 includes a projection of growth deceleration in the latter part of the year, with expectations for the Fed to gradually reduce interest rates.

Jerome Powell, Chair of the Federal Reserve Board, emphasized the Fed’s commitment to continue supporting the economy amidst predictions that it could potentially cut rates five times in 2025. 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. This outlook contrasts with some Wall Street analysts who are warning that rates may remain elevated for longer due to persistent high prices.

Economists are closely monitoring inflation levels and the potential impact of the stock market on financial conditions. However, despite unexpected inflation acceleration in recent months, general sentiment remains that the Fed will likely continue its path of gradual rate cuts based on economic indicators and inflation trends.