As core inflation is on track to return to the 2% target by the middle of next year, we expect the Fed to cut interest rates by 25bp at every meeting next year from March onwards, with rates eventually falling to between 3.00% and 3.25% in early 2025. The lagged impact of previous monetary tightening will continue to feed through for the next few quarters, however, pushing GDP growth well below potential. But we expect the economy to narrowly avoid a recession, and rate cuts should fuel a pick-up in GDP growth starting in the second half of next year.
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