United States

U.S. economic growth is expected to expand by 2.3% in 2023 – slightly stronger than last year’s 2.1% – before slowing to just 1.3% in 2024 and then gradually rising back to trend growth (~1.8%) in 2025.

The unemployment rate is expected to rise by just 1.0 percentage point, reaching a peak of 4.5% in Q4-2024, before gradually moving back to its long-run average of 4% by early-2026.

Inflation has slowed from its multidecade highs and is expected to continue to drift lower over the next few years. Core PCE inflation (the Fed’s preferred measure of inflation) isn’t expected to reach the FOMC’s 2% inflation target until the second half of 2025.
We project the fed funds rate to remain in the 5.25% to 5.50% range for the next few quarters. As higher rates cool demand-side pressures and inflation moves meaningfully back towards 2%, we expect the Fed to cut interest rates back to a level more consistent with its neutral (2.75%) rate.