The Federal Reserve is on track to accomplish quite a feat. Despite inflation, severe monetary tightening and the inversion of the yield curve, the monetary authorities will achieve a soft landing for the economy and avoid recession, Desjardins Group economists now predict.
Thus, GDP growth will remain positive throughout 2024. These forecasts, revised in October, now put real growth in the U.S. economy at 2.4% in 2023 and 1.5% in 2024.
The famous soft landing scenario for the US economy is based on an aggressive rate hike by the Federal Reserve with the aim of lowering inflation to 2% while avoiding pushing the economy into recession.
“It seems to be this unicorn scenario that is coming true,” said Desjardins senior economist Benoit P. Durocher on Tuesday noon. He was invited to the podium of the Urban Development Institute of Quebec. In October, we revised our forecasts, sending the message that we could well avoid recession in the American economy. It could also be one of the only economies to avoid recession in the coming quarters. »
Unfortunately, Canada is faring less well. The Desjardins Movement predicts that the country and Quebec will fall into recession somewhere between the end of 2023 and the beginning of 2024. But here, nothing very painful yet.
“We see the trend slowing down quarter after quarter as the restrictive effects of rate increases are felt,” explains Mr. Durocher. We are forecasting at the end of 2023, at the beginning of 2024, both in Quebec and in Canada, our famous two consecutive quarters of decline in real GDP, the definition of a technical recession. »
Desjardins anticipates Canadian GDP growth of 1.1% for 2023 and 0.1% in 2024. In Quebec, it anticipates growth of 0.3% in 2023 and 0% in 2024. Mr. Durocher sees inflation return to 2% by the end of 2024.
“The good news is that the Bank of Canada may begin to gradually lower interest rates. In our projections, we foresee gradual reductions starting in spring 2024.” Mr. Durocher expects key rates to converge towards a range of 2 to 3%.