Because to the labor market’s return to a “better balance” and the slowdown in inflation, Deutsche Bank no longer predicts that the US economy will enter a recession this year, provided that unemployment stays relatively low.
The brokerage had earlier predicted that when the Federal Reserve raised interest rates to control inflation and reduce the window for a soft landing, the economy would experience a slight recession.
In contrast to its previous estimate of 0.3%, Deutsche Bank stated in a note on Monday that it now projects the U.S. economy to grow by 1.9% this year on a quarterly average basis.
Decline In Labour Market
“Though the economy continues to face several headwinds – namely, still-tight credit conditions, rising consumer delinquency rates and a decrease labor market – the resilience to date points to a more benign slowdown in 2024 than we had previously expected to,” said Matthew Luzzetti, the brokerage’s chief U.S. according to Reuters.
Although it still anticipates the Fed to begin lowering interest rates in June, Deutsche Bank has lowered its earlier prediction of 175 basis points (bps) to 100 bps for this year.
The U.S. economy shrugged off grim forecasts of a recession following the Fed’s aggressive rate hikes, growing by a faster-than-expected 3.3% in the fourth quarter on the back of robust consumer spending. Growth for the entire year came in at 2.5%.