Short-term resilience, but no reacceleration likely in the mid term
Short-term resilience, but no reacceleration likely in the mid term
Thursday 16 May 2024
Cross Asset
Short-term resilience, but no reacceleration likely in the mid term
May 2024 | We have markedly revised up our forecast for US growth, in particular for H1 2024. We continue to expect GDP growth to decelerate below its potential pace over the next few quarters, before recovering in 2025. Regarding inflation, although the downward trend in core consumer price index inflation has recently stalled, we think that the disinflationary process will continue, albeit along a bumpy road with stickier dynamics. The Fed will still be in a position to pivot towards rate cuts and we expect 75 bps of cuts in 2024 (vs 40 bps by markets) as: (1) monetary policy remains restrictive and will become more restrictive as inflation declines; (2) growth will slow down; and (3) recent inflation data have not altered our year-end projections.
01 | The International Monetary Fund outlook highlights the remarkable resilience in growth and declining inflation in most countries. However, the medium-term outlook remains subdued when compared to the pre-pandemic growth average.
02 | Although inflation is softening, its reduction remains a priority, and central banks need to calibrate monetary policy at a country level.
03 | The tremendous optimism in financial markets based on the soft-landing narrative presents challenges.
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