US Economy: The US economy is expected to grow 2.6 per cent in 2023, 1.2 per cent in 2024 and 2 per cent in 2025 with risks on the downside, the report by Elara Securities showed.

“We project the unemployment rate at 5 per cent in 2024 (end-Dec) with risks on the upside. We do not see inflation coming down and sustaining at 2 per cent in 2024. For 2024, expect PCE inflation at 2.4 per cent and core PCE inflation at 2.7 per cent,” the report noted.

Fed Fund Rate

The report highlighted that a 4.5 per cent fund rate is expected in 2024. But going forward in 2025, it can come down to 3 per cent. “We see first cut in Q2CY24 with overall 100bps cut in 2024E,” the report mentioned. According to the report, US fiscal health is the key uncertain factor for 2024, which is also an election year. Pull-back on government spending or, such announcements by GOP (the Republican party) can come as a negative shock for the markets and economy.

Softening labor market conditions and consequent easing of private demand, owing to the full pass-on of 550 bps rate hike, are seen as key to inflation moderation.

The report noted that headwinds to inflation in 2024 are from re-emerging and elongated supply chain shocks and slower-than-expected consumer spending. “If wage growth doesn’t moderate at a faster pace in 2024, reaching 2 per cent on a sustainable basis remains illusive,” the report mentioned.

The report highlighted that a 4.5 per cent fund rate is expected in 2024.

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