U.S. recession fears drop

Wall Street economists are forecasting two rate cuts this year from the U.S. Federal Reserve Board, followed by more rate relief in 2025, according to the U.S. Securities Industry and Financial Markets Association (SIFMA).

U.S. GDP growth will come in at 1.6% this year, rising to 2.0% next year, projected the industry trade group’s mid-year survey of chief U.S. economists at 20 large financial firms.

“As we reach the midpoint of the year, our survey results found a generally upbeat near-term outlook for the U.S. economy,” said Jay Bryson, chief economist with Wells Fargo and chair of the SIFMA Economist Roundtable, in a release.

“Despite some challenges, such as inflation and monetary policy concerns, our findings suggest a path towards sustained growth and stability, with expectations of a ‘soft landing’ and gradual easing of policy in the near future,” he added.

The latest forecast, which marks a 0.9 percentage point increase from the SIFMA survey at the end of 2023, also signals declining recession fears.

“Over 80% of our economists put the probability of recession from 0% to 30%,” SIFMA’s report on the research said.

Against this backdrop, the majority of economists anticipate two rate cuts from the Fed this year and four cuts next year. Over half of respondents expect the cuts to total 100–175 basis points by the end of 2025.

As for the timing of those cuts, over 50% of economists expect a rate cut in September, two-thirds expect a cut in November and over 85% see a rate cut by December.

SIFMA noted that 14% of economists expect no rate cut at all in 2024.

On inflation, the economists raised their forecast by 0.4 points from the previous survey, estimating the core rate will finish the year at 2.8%.

“The top factor to core inflation estimates is wage growth,” SIFMA said, noting that average wage growth this year remains 1.2 points above the three-year pre-pandemic average.