Soft landing still in sight – Danske Bank

Economic growth is mostly slowing in line with our expectations, but we believe recession risks remain low. We make only marginal adjustments to our forecast profile and see GDP growth in 2024 at 2.5% (from 2.3%) and in 2025 at 1.5% (unchanged), Danske Bank macro analysts note.

Fed to hit terminal policy rate of 3.00-3.25%

“Potential output continues to grow at a brisk pace, supported by rising labor supply, solid productivity growth and fiscal policy-driven demand for manufacturing investment.”

“Risks to the outlook remain somewhat tilted to the downside. The current low savings rate indicates that consumer reserves remain weak. The slow transmission of monetary policy and the high share of fixed-rate mortgages suggest that rate cuts will not provide a quick boost to economic growth if the outlook deteriorates faster than we expect.”

“Inflation forecasts have been adjusted modestly lower. We see headline inflation averaging 2.9% in 2024 (from 3.2%) and 2.2% in 2025 (from 2.5%) and core inflation at 3.3% in 2024 (from 3.4%) and 2.4% in 2025 (from 2.6%). We now expect the Fed to cut interest rates by 25bp at each meeting from September to June 2025 (previously only every two September meetings), followed by two final cuts in H2 2025 (final rate 3.00-3.25 %; previous 3.75-4.00%).”