Despite looming recession predictions for 2023, the U.S. economy is set to remain strong in 2024, according to Robert Kaplan, former president of the Dallas Federal Reserve.
What Happened: Talking to CNBC on Tuesday, Kaplan expressed a positive outlook on the U.S. economy. “I think there is a good possibility that we won’t have a recession in 2024,” Kaplan stated, attributing the Inflation Reduction Act and the Infrastructure Act’s substantial government spending to the economy’s endurance, reported Business Insider.
Kaplan underscored the high demand for services and workers driven by the U.S. government’s project spending despite weak sectors like consumer goods and key global economies like China. This situation provides the Federal Reserve with an advantageous position to lower interest rates and bring about a soft landing for the economy.
Kaplan indicated that the Federal Reserve might take action as early as the spring, depending on further improvements in the coming months.
See Also: China Vs. Emerging Markets: Opportunity Or Value Trap For Investors In 2024?
Why It Matters: Kaplan’s optimistic forecast aligns with Fed Chair Jerome Powell’s earlier statement that the current interest rate is "likely at or near the peak of this tightening cycle” in December.
Fed officials have raised their GDP growth estimates for this year, they anticipate a slowdown, with the median forecast dropping to 1.4% in 2024.
This echoes Kaplan’s earlier views from May, where he suggested the central bank should pause interest rate hikes due to the economy’s initial stages of banking turmoil and impending credit issues.
Further supporting this stance, Doubleline Capital CEO Jeffrey Gundlach labeled the Fed’s decision as “pretty dovish,” indicating a potential for rate cuts in 2024.
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