(Reuters) – Deutsche Bank no longer expect the U.S. economy to tip into recession this year, given cooling inflation and the labor market returning to a “better balance” without unemployment rising significantly.
The brokerage earlier expected the economy to enter a mild recession as the Federal Reserve tightened interest rates to tame inflation, narrowing the window for a soft landing.
Deutsche Bank said in a note on Monday that it now expects the U.S. economy to grow by 1.9% this year, on a quarterly average basis, compared with its prior forecast of 0.3%.
“Though the economy continues to face several headwinds – namely, still-tight credit conditions, rising consumer delinquency rates and a slowing labor market – the resilience to date points to a more benign slowdown in 2024 than we had previously projected,” said Matthew Luzzetti, the brokerage’s chief U.S. economist.
Deutsche Bank still expects the Fed to start easing interest rates from June, but now expects 100 basis points (bps) of rate cuts this year, less than its earlier expectation of 175 bps.
The U.S. economy grew a faster-than-expected 3.3% in the fourth quarter, amid strong consumer spending, with growth for the full year coming in at 2.5%, shrugging off dire predictions of a recession after the Fed’s aggressive rate hikes.
(Reporting by Roshan Abraham in Bengaluru; Editing by Savio D’Souza)
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