Danske Bank economists anticipate that core inflation will persist at a relatively stable level, providing room for the Federal Reserve to commence rate cuts starting in May.
US economy on a structurally solid footing
The US has experienced a slowdown in economic growth during the winter, although the rate has surpassed initial projections. We anticipate a continued easing in consumer demand, but at a lesser extent than previously expected. Consequently, we are revising our GDP forecast for 2024 to 2.0% (up from 1.1%) and adjusting the 2025 projection to 1.4% (down from 1.6%).
With a more robust economic growth outlook, we anticipate a more persistent level of inflation. Our projections now indicate headline inflation averaging 2.7% in 2024 (up from 2.2%) and maintaining at 2.5% in 2025. Additionally, core inflation is expected to reach 3.2% in 2024 (up from 2.7%) and remain at 2.5% in 2025.
Anticipating the need for monetary adjustments, we foresee the Federal Reserve implementing 25 basis points rate cuts quarterly, starting from the May meeting.
