Danske Bank analysts note that while economic growth is slowing as expected, the risk of a recession remains low. They’ve slightly raised their 2024 GDP growth forecast to 2.5% and maintained 2025 at 1.5%. The Federal Reserve is expected to reach a terminal policy rate of 3.00-3.25%.
Key Points:
- Potential output is growing steadily, supported by labor supply, productivity, and fiscal-driven manufacturing demand.
- Risks are tilted to the downside due to weak consumer savings and slow monetary policy effects.
- Inflation forecasts have been adjusted lower, with headline inflation expected to average 2.9% in 2024 and 2.2% in 2025.
- The Fed is anticipated to cut interest rates by 25 basis points at each meeting from September 2024 until June 2025, with a terminal rate of 3.00-3.25%.