Forecast 2024 (CONT’D FROM PAGE 1)
slowly than previously anticipated because of persistent inflation and ongoing labor market tightness. Cuts of about 25 basis points per quarter are expected over the next few years until the Federal Funds Rate reaches 2.75 percent by the fourth quarter of 2026 and 2.5 percent in 2027. Feeling Good The public mood is a strong driver of the economy. And here the news is good. “Consumer confidence has been trending higher, and I think prospects are good for it to improve next year,” said Scott Hoyt, Senior Director of Consumer Economics for Moody’s Analytics ( economy. com ). “Things should normalize as the economy continues to grow and gas prices stabilize.” One major driver of consumer confidence is a healthy job market. “The unemployment rate has been very low, bouncing around between 3.5 percent and 3.8 percent for some time,” said Hoyt. A slowdown in job growth orches- trated by the Federal Reserve’s interest rate hikes should moderate things. “We think unemployment will trend up- ward a bit, ending 2023 around 3.9 percent and 2024 around 4.2 percent.” (Many economists peg an unemploy- ment rate of 3.5 percent to 4.5 percent as the “sweet spot” that balances the risks of wage escalation and economic recession.) Low unemployment may fuel happy sentiments among citizens, but it presents employers with two practical chal- lenges. The first is the need to raise wages to attract suffi-
and forecasts only a modest recovery of 0.3% in 2024. Battling Inflation Reports from the field confirm the economists’ readings. “Our members are experiencing a business slowdown, due largely to the effect of increasing interest rates,” said Tom Palisin, Executive Director of The Manufacturers' As- sociation, a York, Pennsylvania based regional employers' group with more than 370 member companies (mascpa. org). While businesses understand the need for higher interest rates, they nevertheless hope for early relief. “If inflation does not continue to drop, interest rates will have to be increased further, which will be a big problem,” said Palisin. So are the Federal Reserve’s efforts paying off? There’s some good news here, as well as a sunny fore- cast. Moody’s Analytics expects year-over-year consumer price inflation to average 3.2 percent when 2023 numbers are finally tallied, down from over 6 percent a year ear- lier. Moreover, the number should continue to drop until it reaches the Fed’s target rate of 2 percent late in 2024. (These figures represent the “core personal consumption expenditure deflator (PCED),” which strips out food and energy prices and is the Federal Reserve’s preferred mea- sure of inflation). Indeed, Moody’s Analytics believes the Fed will start to lower interest rates around June of 2024, although more
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