Wells Fargo Report: Less Restrictive Monetary Policy to Boost U.S. Growth Outlook
In a recent report, Wells Fargo suggests that a less restrictive monetary policy could have a significant impact on the U.S. growth outlook. The bank predicts that the Federal Reserve will cut rates by 50 basis points in September and another 50 basis points in November, bringing the federal funds rate to a range of 3.25%–3.50% by mid-2025.
The labor market is expected to benefit from this shift, as the report notes a slowdown in payroll growth and rising unemployment. The forecast now sees nonfarm payroll gains averaging 116,000 per month over the next 12 months, down from 209,000 in the previous year. A softer monetary policy is expected to stabilize the labor market by supporting job creation.
Consumer spending is also poised to benefit from lower interest rates, with expectations for real PCE to slow before rebounding next year. Lower borrowing costs should encourage consumer spending and support economic growth, despite a projected slowdown in income growth.
The housing market is expected to see positive effects as well, with an upward adjustment in the residential investment outlook driven by declines in mortgage rates. Inflation is projected to moderate, with the core PCE price index expected to increase by 2.6% year-over-year in the fourth quarter of 2024.
Overall, a less restrictive monetary policy is seen as necessary to sustain the economic expansion that has been in place since mid-2020. This shift is expected to stimulate various economic sectors and alleviate current economic pressures.
In conclusion, investors and consumers should pay attention to the potential impacts of a less restrictive monetary policy on the economy. Lower interest rates could lead to increased consumer spending, a stabilized labor market, and positive effects on the housing market. It is essential to stay informed and adapt investment strategies accordingly to take advantage of these potential opportunities.