By Peter Bergman (MoneyAmped.com)
According to economists at Deutsche Bank (DBKGn.DE), it is projected that the Federal Reserve will implement more aggressive rate cuts than what is currently anticipated by the markets. This is expected to occur as a mild U.S. recession is predicted to happen in the year’s first half.
Deutsche Bank Predicts Lower Interest Rates
In an outlook report, economists from Deutsche Bank projected a decrease of 175 basis points in interest rates in 2024.
With the current Fed rate ranging from 5.25% to 5.5%, the rate will potentially decrease from 3.5% to 3.75% by the conclusion of this year. According to data from LSEG, traders are factoring in a rate of 4.48% by December 2024.
In the words of Brett Ryan, the senior U.S. economist at Deutsche Bank, it is anticipated that there will be a consecutive decline in economic growth for two quarters during the initial half of 2024. This projected downturn is expected to significantly increase the unemployment rate, rising from its current level of 3.9% to 4.6% by the middle of the following year.
The anticipated trajectory of the economy suggests a potential deceleration during the initial six months of the year, leading to a subsequent adoption of a more assertive approach towards reducing various factors in the latter half of the year, as stated by the individual in question.
Simultaneously, the financial institution anticipates that the prevailing economic fragility will alleviate the inflationary forces, as stated by Ryan.
A Mild Recession Can Be Expected in the First 6 Months
Per the report on Monday, the financial institution has projected a “mild recession” during the initial six months of 2024.
Deutsche Bank anticipates a preliminary reduction of 50 basis points during the Federal Reserve’s meeting in June 2024, to be succeeded by an additional 125 basis points of cuts throughout the remaining duration of the year.
The current state of the United States economy has thus far demonstrated resilience in mitigating anticipated recessionary conditions despite the Federal Reserve’s implementation of a cumulative 525 basis point increase in interest rates since March of 2022.
According to Ryan, it has been stated that in the event of a stabilization in future circumstances, the Federal Reserve would implement a significantly reduced reduction rate.
