Australia Exchange foreign exchange information, good for the dollar! Experts say the probability of a U.S. recession has fallen, and a soft landing is expected

APP news -If the Federal Reserve ends its interest rate hikes, a resilient U.S. economy could avoid a recessionBut growth is set to slow next year as borrowing costs rise.

So say top economists at America's biggest banks, who expect GDP to slow to 1.2 per cent in 2024 from an estimated 2 per cent this year as rising interest rates hit growth.

However, economists are also increasingly optimistic that,The Fed can achieve a rare "soft landing"That is, raising interest rates to a level sufficient to reduce high inflation without triggering a recession.As recently as last spring, most economists believed that a recession was inevitable, and the Fed has achieved only one or two soft landings in its history.

Simona Mocuta, chairperson of the American Bankers Association's board of economic advisers, admits there are good reasons to doubt a soft landing from the historical record. "What you're arguing for is really atypical," says Ms Mocuta, chief economist at State Street Global.

Just eight months ago, this group of economists predicted that U.S. economic growth would flatten in 2023, pushing the country to the brink of recession.

Economists at the American Bankers Association noted that the labor market remained strong, with inflation-adjusted incomes rising for the first time in several years.These trends are likely to keep consumer spending, the economy's main engine, increasing enough to sustain U.S. economic growth.

At the same time,Inflationary pressures have eased enough to give the Federal Reserve room to stop raising interest ratesAnd even cut interest rates by up to 1 percentage point before next year.

"Given the progress made and expected on inflation,Most committee members believe that the Federal Reserve's tightening cycle has come to an end。”

She added: "However, the fight against inflation is not yet won, so the Fed must remain vigilant."

The American Bankers Association panel forecasts that annual inflation will fall from the current 3.2 per cent to 2.2 per cent under the CPI by 2024, and predicts that the Fed's preferred measure of inflation, PCE, should fall to the same range.

However, economists at the American Bankers Association said the sharp rate rises of the past year and a half were likely to put more pressure on the economy in coming months, with consumers expected to cut spending and companies already curtailing investment.

The slowdown in U.S. economic growth could push the unemployment rate to 4.4% by next year from the current 3.8% and cool an overheated labor market.

But Mr. Mocuta said a big rise in unemployment, which usually occurs when interest rates spike, was unlikely and companies were more hesitant to cut jobs because of chronic labour shortages and greater difficulty in hiring.