Is the Federal Reserve’s plan to sustain higher interest rates a viable strategy? That’s the big question, especially if it risks damaging the U.S. economy. However, most media outlets reassure that everything is on track. They anticipate the Fed successfully curbing inflation to its target rate by 2024 without plunging us into a severe recession.
Though there’s a consensus that the Fed will eventually change its rate policy, there’s a split in views on why they might cut rates. The prevailing belief is that the Fed will likely reduce rates in 2024 after securing a smooth economic slowdown—a notable accomplishment considering the historic pace of interest rate hikes.
Yet, there’s an alternative view expressed by analysts at Morgan Stanley and UBS. They foresee rate cuts next year, not because the Fed orchestrated a soft landing to slow the economy and dodge a recession. Instead, according to UBS economists, the U.S. economy could face a full recession or a hard landing in the coming year, compelling the Fed to slash the overnight rate by 275 basis points throughout the year—almost quadruple what the stock market has factored in. Their forecast suggests the fed funds rate could plummet from 5.5% to 2.375% by the end of 2024.
The fact that the Fed has…