Goldman Sachs US Chief Economist David Mericle said the Federal Reserve has kept inflation under control and appears to have avoided a recession for now. Mericle shared his views on the U.S. economy, inflation and the Federal Reserve’s future steps in an episode of the “Goldman Sachs Exchanges” podcast.
Mericle stated that there are signs of a decrease in inflation, pointing out factors such as the stabilization of the US labor market and the decrease in short-term inflation expectations. Therefore, Mericle stated that inflation has started to normalize, albeit with a delay, and that he expects this trend to continue.
Regarding the increase in energy prices, Mericle stated that this situation will not have a major impact on inflation and should be considered as a minor problem. However, he emphasized that the Federal Reserve’s fight against inflation is still ongoing and there is still work to be done to return to the 2 percent target.
Mericle stated that the Federal Reserve’s fight against inflation is still not completed and the return to the 2 percent target is not certain, so it is too early to say that this problem has been solved.
Interest Rate Cut May Start in the 2nd Quarter of 2024
Stating that inflation in the USA has decreased from the highest levels exceeding 9 percent in the summer months to around 3 percent in recent months, Mericle stated that this decrease can be partially attributed to the Federal Reserve’s interest rate increases. The Federal Reserve’s next policy meeting is scheduled for this month, but Mericle said it was unlikely to raise rates in September and predicted the Federal Reserve could start cutting rates in the second quarter of 2024.
Mericle said the risk that the Federal Reserve’s fight against inflation would lead to a recession is low and misalignment of monetary policy does not pose a major threat at this stage.
