February 2, 2024
The economy seems to have more positive momentum than anticipated. The economy continues to create jobs and wages keep growing and consumers continue to spend As a result, we expect GDP growth of about 1.8% in each of the first two quarters of 2024 with growth of 2.0% in the second half of this year.
Given the GDP forecast above, we expect the unemployment rate to remain at 3.7% for the foreseeable future. With monthly increases in both the labor force and payroll employment homing in on about 160 thousand, the unemployment rate should stay quite steady throughout 2024.
The core CPI inflation rate was 3.9% in 2023. Slower inflation, but still not even close to the Fed’s 2.0% objective. But as surplus liquidity in the economy disappears by spring, we expect the core CPI to slide to 3.1% by the end of this year.
Moderate GDP growth and a steady slowdown in inflation rate should pave the way for the Fed to begin a length easing process during the summer. We expect the current 5.5% funds rate to fall to 4.75% by yearend, and then continue to slide steadily to 2.5% throughout 2025 and into 2026.