Only 24% of economists surveyed by the National Association for Business Economics said they saw a recession in 2024 as more likely than not. The 38 economists surveyed come from organizations such as Morgan Stanley, the University of Arkansas, and Nationwide.
Such forecasts imply a belief that the Fed can strike the delicate balance of slowing the economy just enough with high interest rates to control inflation, without killing its growth entirely.
“While most respondents expect the unemployment rate to rise slightly in the future, a majority expect the rate will not exceed 5%,” Ellen Zentner, president of the association and chief U.S. economist at Morgan Stanley, said in a statement.
The Federal Reserve has raised its key interest rate above 5.25% to the highest level since the early millennium, after being almost zero early last year.
High rates slow inflation by making borrowing more expensive and hurting stock prices and other investments. This combination typically slows spending and starves fuel inflation. So far, the labor market has remained remarkably strong despite rising interest rates, and the unemployment rate remained at a low of 3.9% in October.
Most economists surveyed expect inflation to continue to slow in 2024, although many say it may not reach the Fed’s 2% target until the following year.
Of course, economists only expect price increases to slow, not reverse, which is what it would take for prices of groceries, haircuts and other items to return to where they were before inflation spiked during 2021.
The average forecast of economists surveyed called for the CPI to rise 2.4% in the last three months of 2024 compared to the previous year. This would be milder than the inflation exceeding 9% that American families suffered during the summer of 2022.
Expectations are divided among economists on when the Federal Reserve could start cutting interest rates, which could ease pressure on the economy and act as a stimulant for financial markets. Some economists believe the first cut could arrive during the first three months of 2024, while nearly a quarter of survey respondents believe that will not happen until the last three months of the year.