The growing swarm of “soft landing” believers recently gained an important new member: the Congressional Budget Office (CBO). Earlier today, the CBO released an economic projections report predicting the U.S. economy will avoid a recession next year.
What do you need to know about the latest pressing economic forecast?
Well, according to the nonpartisan agency, the U.S. economy will grow at a slightly slower rate in 2024 and experience slightly higher unemployment. Indeed, the CBO estimates the economy will grow 1.5% in 2024, slower than the 2.5% estimate released back in February, citing weakening consumer spending and softening corporate investment.
Specifically, the CBO predicts unemployment will climb to 4.4% in the fourth quarter of 2024 and likely remain that high through 2025. It also forecasts that inflation will fall to just 2.1% in 2024, essentially achieving the Federal Reserve’s long-stated inflation goal.
Worth noting is that the CBO itself points out that its projections are “highly uncertain, and many factors could lead to different outcomes.”
CBO Fuels Soft Landing Hopes
While the report isn’t purely positive, Wall Street is clearly more preoccupied with the fact that the CBO doesn’t believe the country will enter a full-fledged economic downturn.
Indeed, since the Fed’s policy meeting on Wednesday, hopes for a soft landing have reached a fever pitch. It seems all of Wall Street has been on cloud nine since the central bank hinted at three or more rate cuts in 2024, which has been evident in the stock market rally since Wednesday.
Reasonably so, falling interest rates are typically conducive to stronger economic growth and improved consumer spending.
Despite this, concerns remain elevated over the likelihood of a soft landing. Some firms continue to hold expectations of a recession in 2024 despite evidence to the contrary. Regardless, today’s CBO report should ease some investors’ minds heading into an uncertain new year.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
