![]() ![]() We’re projecting that real gross domestic product growth remains in positive territory on a full-year basis. Once the war on inflation is won, the Fed could shift to doing what’s needed to jump-start economic growth. As such, we project inflation to average just 1.5% over 2023 through 2026. We're projecting price pressures to swing from inflationary to deflationary by 2023, owing greatly to the unwinding of price spikes caused by supply constraints in durables, energy, and other areas. Accordingly, longer-term yields-including mortgage rates- should fall as well.įalling inflation should clear the way for the Fed to cut interest rates. We project the federal-funds rate to fall from a peak 3% at the start of 2023 to 1.5% by 2024. We expect the Fed to pivot to easing monetary policy in 2023 as inflation falls back to the central bank's 2% target and the need to shore up economic growth becomes paramount. We Expect the Fed to Pivot to Cutting Interest Rates in 2023 ![]() This accords with the Fed’s desire to cool off the economy in order to relieve pressure on prices. Ultimately, higher borrowing costs slow the rate of economic growth by discouraging spending.
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