The Fed’s inflation fight has stalled, putting in jeopardy the projected rate cuts in 2024. Yet, the US economy remains recession free even with the highest interest rates in over two decades. What happens next?
Facilitated by Dr Edmond J Seifried
The US economy continues to baffle experts. The Fed is now in the second year of its battle against inflation which began in the spring of 2022. The FOMC has implemented one of its most powerful anti-inflationary policy regimes in decades. The fed policy rate currently stands at its highest level in over 20 years. While inflation has responded well to the tightening imposed by the Fed in 2023, progressed on inflation as recently slowed. The current inflation rate remains well above the target of 2.0% and at this point one can hear the word stagflation bandied about by certain pundits. The expected rate cuts projected for calendar year 2024 are now being questioned, and some experts are suggesting rate hikes are now in play.
Surprisingly, the US economy has remained recession-free during the entire process. Real GDP increased 2.5 percent in 2023 (from the 2022 annual level to the 2023 annual level), compared with an increase of 1.9 percent in 2022. The first quarter GDP growth rate for 2024 was relatively low at 1.6%, but remained in the positive range. However, monetary policy works with a significantly long, albeit, variable lag, and most experts suspect that the slowdown in economic activity due to almost two years of monetary tightening is sure to kick in soon. Dr Ed will report on these developments and much more during his session.