Economists Predict Faster Labor Cooling and Steeper Fed Cuts

According to a recent Bloomberg survey of economists, projections for the U.S. labor market indicate potential for faster cooling. This also suggests that the Federal Reserve (Fed) may take more aggressive steps in lowering key interest rates. Consequently, many experts forecast that by the end of 2024, the rate might be around 3% or even lower, given the current economic conditions.

Over 40 economists participated in the survey, and their views reflect growing concern regarding the state of the labor market and its impact on the economy. Respondents noted that, as expected earlier, the slowdown in job creation may be sharper than previously thought. This is occurring amid reports that inflation continues to cool, providing the Fed with more room to maneuver in making decisions regarding interest rates.

Economists emphasize that employment and inflation data will be crucial for future economic growth. If the current trend continues, the Fed is likely not only to halt rate hikes but also to begin cuts sooner than previously anticipated. Some economists even point out the possibility of rate cuts starting as early as next year if inflation remains under control.

Consequently, market expectations are becoming more optimistic, offering hope for a recovery in investments and consumer spending. Labor market strain and cooling inflation could lead to a softer economic policy from the Fed, which, in turn, may support long-term economic growth.

Despite the positive assumptions, economists also warn about potential risks such as possible delays in economic recovery and the influence of global markets. The current state of the U.S. economy will depend on the effectiveness of current monetary policy and other external factors.