The Federal Reserve is on track to achieve a remarkable feat. Despite inflation, a sharp tightening of monetary policy and the inversion of the yield curve, the monetary authorities will achieve a soft landing of the economy and avoid a recession, economists at the Desjardins Group now predict.
Thus, GDP growth will remain positive throughout 2024. These forecasts, revised in October, now assume real growth in the US economy of 2.4% in 2024 and 1.5% in 2024.
The famous scenario of a soft landing of the American economy is based on an aggressive interest rate hike by the Federal Reserve in order to reduce inflation to 2% while avoiding a recession in the economy.
“It appears that this unicorn scenario is coming true,” Benoit P. Durocher, senior economist at Desjardins, said midday Tuesday. He was invited to the panel of the Urban Development Institute of Quebec. In October we revised our forecasts with the message that we could well avoid a recession in the American economy. It could also be one of the few economies that can avoid recession in the coming quarters. »
Canada is not so lucky
Unfortunately, Canada fares less well. The Desjardins Movement predicts that the country and Quebec will fall into recession sometime between late 2023 and early 2024. But there is nothing very painful here yet.
“We see the trend slowing from quarter to quarter as the restrictive effects of tariff increases become noticeable,” explains Mr. Durocher. We forecast our famous two consecutive quarters of declines in real GDP, the definition of a technical recession, in late 2023 and early 2024 in both Quebec and Canada. »
I insist, it’s really a small drop. We are talking about a very mild and very short recession.
Benoit P. Durocher, director and senior economist at Desjardins
Desjardins expects Canadian GDP growth of 1.1% in 2024 and 0.1% in 2024. Quebec is expected to grow 0.3% in 2024 and 0% in 2024. Mr. Durocher expects inflation to return to 2% by the end of 2024.
“The good news is that the Bank of Canada may begin to gradually lower its interest rates. In our forecasts, we expect gradual reductions from spring 2024.” Mr. Durocher expects the key interest rates to approach a range of 2 to 3%.
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