Economic Turbulence: Can the U.S. Avoid a Recession in 2024?

 

The United States economy is at a crossroads as we approach the start of a new year. The prospect of a smooth landing in the midst of economic turmoil in 2024, which appeared improbable just a year ago, is now emerging as a viable option. 

The surprise shift in approach by the Federal Reserve, as well as different economic indicators, are altering the landscape. Let’s look at the specifics that could change the story of a prospective recession.

In an unexpected move, Fed Chair Jerome Powell signaled a shift away from the dramatic interest rate hikes of the last two years. After dramatically raising rates, the central bank now expects a turnaround, with three rate decreases planned for the coming year. This shift represents a dual focus on containing inflation and promoting economic growth.

The announcement caused a strong market rise, with the S&P 500 index rising by 1.6%. If current market conditions continue, they may add to the decreasing likelihood of a recession. 

Analysts are revising their forecasts in light of these changes. For example, Gregory Daco of EY-Parthenon has reduced the probability of a recession from 50% to 40%.