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Bank of America has released its 2024 outlook, predicting interest rate cuts by the middle of that year. Despite the Federal Reserve’s current position, the bank believes the US can achieve a “soft landing” in 2024, navigating the impact of interest rate hikes from the previous two years.
While anticipating that Americans will experience the consequences of the Federal Reserve’s recent rate hikes, potentially leading to weakened growth and higher unemployment rates, Bank of America envisions a scenario where the country combats inflation without facing a severe economic downturn.
Candace Browning, Head of BofA Global Research, noted that 2023 defied expectations with the absence of anticipated recessions and rate cuts. She expressed the belief that 2024 could be the year central banks orchestrate a soft landing, acknowledging potential downside risks.
Michael Gapen, Head of the bank’s US Economics team, expects the first Fed rate cut to occur in June, followed by additional cuts at a pace of 25 basis points per quarter through the year’s end. However, the bank recognizes “policy uncertainty” surrounding the upcoming presidential elections, which may influence interest rates based on candidates’ economic approaches.
Notably, Bank of America’s projection aligns with some experts’ views, while others, like UBS economists, suggest earlier rate cuts in March. Vanguard economists, in contrast, anticipate rate cuts in the latter half of 2024.
Fed Chair Jerome Powell, in response to questions about rate cuts during the November press conference, emphasized the central bank’s focus on achieving a sufficiently restrictive monetary policy to bring inflation down to 2% sustainably. Powell acknowledged positive economic momentum but reiterated that rate cuts are not currently under consideration.
Despite the variance in predictions, the consensus is that the US economy is moving in the right direction, with considerations for potential risks and uncertainties in the coming year.
