The U.S. economy is progressing along a soft-landing path, according to the latest forecast of the American Bankers Association’s Economic Advisory Committee, released today. Recession risks have diminished, inflation continues to moderate and employment gains remain robust. A gentle easing cycle by the Federal Reserve will start around mid-year, facilitating trend-like GDP growth, according to the group.
The committee, which includes the chief economists from North America’s largest banks, forecasts real economic growth remaining healthy at around 1.7% for 2024 and 1.8% for 2025. Recession odds have diminished somewhat over the last six months, although policy and geopolitical risks keep them close to 30% both this year and next. Following considerable progress over the past 18 months, the group expects inflation to continue gradually easing toward the Fed’s 2.0% target by the latter part of 2025. The committee’s consensus view is that the Fed will begin cutting the target federal funds rate range in mid-2024, instituting three 25-basis-point cuts before the end of the year.
The EAC also sees evidence of modest labor market softening, the result of slower job growth rather than job losses. The pace of anticipated job creation is forecast to slow from over 139,000 per month in 2024 to just about 117,000 in 2025.
“Last year’s combination of resilient growth and moderating inflation is unusual historically and should be celebrated,” said Simona Mocuta, EAC chair and chief economist at State Street Global Advisors. “The elements appear in place to extend a milder version of this in 2024, although we should not take this for granted. The risks to the outlook are two-sided but nuanced. The committee sees risks to the growth forecast as fairly balanced, but risks to the inflation forecast remain skewed to the upside.”
