Aggressive Forecast: Paul Gruenwald Predicts Multiple Rate Cuts by the Fed in Coming Years

S&P Economist Predicts 5 Interest Rate Cuts in 2025 as US Economy Slows

Paul Gruenwald, the global chief economist at S&P Global Ratings, predicts that the US economy will slow down in the coming years, leading to a potential rate cut by the Fed. According to Gruenwald, who is known for his aggressive predictions, the Fed could cut rates up to five times in 2025 and reduce them by two full percentage points as inflation cools. This is more than what other economists are forecasting.

Gruenwald believes that despite a recent surge in productivity and investment, the economy will eventually slow down due to various factors such as global trade tensions and rising debt levels. He also expects inflation to inch closer to the Fed’s 2% target, giving it justification to start cutting rates more significantly.

S&P Global anticipates a 2.5% GDP expansion by the end of 2024 but foresees a slowdown in growth in the latter half of the year. Gruenwald emphasizes that this gradual rate reduction strategy is necessary for maintaining economic stability.

While there are some upside risks to this forecast, including a potential increase in unemployment leading to more aggressive rate cuts by the Fed, Gruenwald still expects gradual rate reductions. In contrast, other Wall Street forecasters believe that interest rates may remain elevated for an extended period due to persistently high prices.

Some economists have warned that inflation could climb even higher this year due to various factors such as an AI-fueled stock market surge without assistance from the Fed. However, Gruenwald believes that these risks are manageable and predicts that inflation will eventually decline again.

Overall, Gruenwald’s prediction of multiple rate cuts by the Fed suggests that investors should be prepared for some level of monetary easing over the next few years. However, it’s important for investors to remain vigilant and monitor economic conditions closely as they evolve over time.

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