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US Inflation to Keep Cooling 12/04 06:35
Most business economists think the U.S. economy could avoid a recession next
year, even if the job market ends up weakening under the weight of high
interest rates, according to a survey released Monday.
NEW YORK (AP) -- Most business economists think the U.S. economy could avoid
a recession next year, even if the job market ends up weakening under the
weight of high interest rates, according to a survey released Monday.
Only 24% of economists surveyed by the National Association for Business
Economics said they see a recession in 2024 as more likely than not. The 38
surveyed economists come from such organizations as Morgan Stanley, the
University of Arkansas and Nationwide.
Such predictions imply the belief that the Federal Reserve can pull off the
delicate balancing act of slowing the economy just enough through high interest
rates to get inflation under control, without snuffing out its growth
completely.
"While most respondents expect an uptick in the unemployment rate going
forward, a majority anticipates that the rate will not exceed 5%," Ellen
Zentner, president of the association and chief U.S. economist at Morgan
Stanley, said in a statement.
The Federal Reserve has raised its main interest rate above 5.25% to the
highest level since early in the millennium, up from virtually zero early last
year.
High rates work to slow inflation by making borrowing more expensive and
hurting prices for stocks and other investments. The combination typically
slows spending and starves inflation of its fuel. So far, the job market has
remained remarkably solid despite high interest rates, and the unemployment
rate sat at a low 3.9% in October.
Most of the surveyed economists expect inflation to continue to slow in
2024, though many say it may not get all the way down to the Federal Reserve's
target of 2% until the following year.
Of course, economists are only expecting price increases to slow, not to
reverse, which is what it would take for prices for groceries, haircuts and
other things to return to where they were before inflation took off during 2021.
The median forecast of the surveyed economists called for the consumer price
index to be 2.4% higher in the final three months of 2024 from a year earlier.
That would be milder than the inflation of more than 9% that U.S. households
suffered during the summer of 2022.
Expectations are split among economists on when the Federal Reserve could
begin cutting interest rates, something that can relieve pressure on the
economy and act like steroids for financial markets. Some economists think the
first cut could arrive during the first three months of 2024, while roughly a
quarter of the survey's respondents think it won't happen until the last three
months of the year.
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