As we enter the final stretch of 2023, we have identified three important economic themes that we believe will continue to have an impact in 2024.
1. Fed pivot, falling bond yields and a bull market for US equities: The US Federal Reserve on Dec 13 left interest rates unchanged and sent its clearest signal yet that hikes have ended, with three rate cuts expected next year.
Fed officials have significantly lowered their inflation forecasts. They reduced their projection for core personal consumption expenditure — the central bank’s preferred inflation indicator — to 3.2% this year, 2.4% next year and 2.2% in 2025. The Fed now expects the US economy to record 2.6% growth this year, up markedly from an earlier forecast of 2.1%.
The bank projects growth easing to 1.5% next year and rising again to 1.8% in 2025.
These figures support what the market calls…
