Your current location is:{Current column} >>Text
What would less restrictive monetary policy mean for the growth outlook? By
{Current column}3924People have watched
IntroductionA less restrictive monetary policy could significantly impact the U.S. growth outlook by stimulating ...
A less restrictive monetary policy could Foreign electrical retailers are in a wave of bankruptcysignificantly impact the U.S. growth outlook by stimulating various economic sectors and alleviating some of the current economic pressures, Wells Fargo said in a recent report.
According to the bank’s latest U.S. Economic Outlook report, the Federal Reserve is expected to cut rates by 50 basis points at its September meeting, followed by another 50 basis points in November. This shift is anticipated to lower the federal funds rate to a range of 3.25%–3.50% by mid-2025, which many consider to be a neutral rate.
The labor market, which has shown signs of weakening, is a primary area where the impact of a less restrictive policy will be felt. The report highlights that "payroll growth has slowed markedly, and unemployment is rising faster than expected" and notes that the recent jobs report "shook up the snow globe and reset expectations for the rest of the year and beyond."
The forecast now sees nonfarm payroll gains averaging 116,000 per month over the next 12 months, down from 209,000 in the previous 12 months. A softer monetary policy is expected to help stabilize the labor market by supporting job creation and preventing further increases in the unemployment rate.
Consumer spending is another crucial area poised to benefit.
"We have adjusted our consumer forecast and now look for real PCE to slow materially at the end of this year and start of next year before rebounding in the second half of next year amid less restrictive monetary policy,” the report states.
Lower interest rates are expected to reduce borrowing costs, thereby encouraging consumer spending and supporting economic growth. Despite a projected slowdown in income growth, consumer fundamentals and aggressive Fed easing should keep spending growth positive.
The housing market is also likely to experience positive effects from lower interest rates. The forecast indicates an upward adjustment in the residential investment outlook, driven by recent declines in mortgage rates and expectations for further rate reductions next year.
We have taken up our residential forecast coinciding with recent declines in the mortgage rate and expectations for further rate softening next year,” Wells Fargo economists wrote. This should boost buyer demand, builder confidence, and overall residential investment, although some near-term weakness is still expected due to the current economic environment.
Inflation, which has been a focal point for the Fed, is projected to moderate. The core PCE price index is expected to increase by 2.6% year-over-year in the fourth quarter of 2024, reflecting a balance between goods and services inflation.
Wells Fargo highlights that "upward pressure on prices continues to ease as input cost growth, including labor, has cooled, and weakening demand is making it harder for businesses to raise prices."
Overall, a less restrictive monetary policy is seen as a necessary move to sustain the economic expansion that has been in place since mid-2020.
Statement: The content of this article does not represent the views of FTI website. The content is for reference only and does not constitute investment suggestions. Investment is risky, so you should be careful in your choice! If it involves content, copyright and other issues, please contact us and we will make adjustments at the first time!Tags:
Related articles
Stocks gain, dollar slides, as banking fear eases By Reuters
{Current column}By Xie YuHONG KONG (Reuters) - Global stocks rose and the dollar softened on Tuesday, as a deal back ...
Read moreEuropean stocks see long
{Current column}Goldman Sachs strategists indicate that recent capital inflows into European stock markets have incr ...
Read moreThe UK's unemployment rate has risen significantly, cooling the labor market.
{Current column}The UK labor market showed more signs of cooling in April, with the unemployment rate rising—a negat ...
Read more
Popular Articles
- U.S. stocks mixed after Walmart beats but debt ceiling worries remain By
- Thai Prime Minister announces inflation review, but central bank previously said no issues
- Trump's hush money case ends Tuesday, says Biden obstructs his campaign.
- US announces new carbon policy, will guide voluntary carbon market setup.
- Gold prices dip, but $2,000 in sight as economic outlook darkens By
- US early rate cut expectations surge, dollar plunges against euro, pound.
Latest articles
-
Dollar weakens ahead of conclusion of Federal Reserve meeting By
-
ECB Chief Economist Lane is confident about the future, expects inflation to fall to 2% next year.
-
Morgan Stanley predicts Bank of Canada will cut rates three more times this year.
-
European stocks see long
-
Pfizer pledge for more equal access to RSV shot faces hurdles By Reuters
-
Germany's economic growth slows down, multiple agencies predict no strong recovery momentum.