The decline of the world’s largest economy is inevitable

“In the long term, the US economy, considered the largest in the world, will face an inevitable recession,” predicted the head of financial conglomerate Societe Generale’s economic policy Koku Agbo-Blois, quoted by ag. Bloomberg.

However, there are some positive aspects to the impending recession of the US economy. At the start of the economic downturn, the leadership of the Federal Reserve System (FRS) may have a compelling reason to cut the key interest rate, which currently remains at the highest level since 2001 from 5.25-5.5 %. The regulator last raised its rate by 25 basis points at the end of July 2023.

However, according to Agbo-Bloah, until the economic downturn begins, a lot will depend on the level of inflation in the country. If it continues to remain high, the Fed may continue to stick to its monetary policy tightening (MCP) course. Achieving the 2% annual inflation target will only be possible taking into account the slowdown in consumer price growth in the US, the analyst concluded.

At the beginning of December, experts from the Danish bank Saxo Bank published another series of “shocking forecasts”, this time for 2024. A financial institution warned of the risks of the “end of capitalism” in the US due to the tax exemption of income from government bonds. The bank also predicts an increase in fiscal spending before the presidential election in 2024. At the same time, due to rising inflationary pressures and the outflow of capital from foreign investors, demand for US government bonds will be weak and lead to a rise in their yields.