US to Face Severe Economic Recession in 2024: Report

The US economy will slip into recession next year in 2024 and this critical situation will force the Federal Reserve to cut the interest rate, the bank announced. 

The UBS Bank on Tuesday said that it's expecting the Fed to respond to falling inflation and an economic slump by slashing rates by an eye-popping 275 basis points i.e. nearly four times the 75-basis-point reduction the market is currently expecting, finance.yahoo.com reported. 

One of the salient specifications of the UBS's forecast is the very pronounced Fed easing cycle seen unfolding from March 2024 onwards," a team led by economist Arend Kapteyn and strategist Bhanu Baweja said in a research note published Tuesday, adding that they expect rates to plunge to just 1.25% in the first half of 2025.

The Fed's cuts would be "a response to the forecasted US recession in Q2-Q3 2024 and the ongoing slowdown in both headline and core inflation," UBS added.

Since March 2022, the Fed has lifted borrowing costs from near-zero to around 5.5% in a bid to clamp down on rising prices.

The inflation rate hit a four-decade high of 9.1% in June last year, but has since started to cool – although it's still running way clear of the central bank's 2% target.

The country's gross domestic product (GDP) expanded 4.9% in the third quarter, for its highest growth rate in two years, the report added.