October 16, 2023
The fast rise in long-term rates of interest over the previous few months will probably weigh on future financial development, in line with commentary by Fannie Mae’s Financial and Strategic Analysis Group. The group additionally revised its fourth-quarter 2023 actual GDP projection upward to 2.5% on a quarter-over-quarter foundation however continues to count on vital slowing in financial development by the tip of the yr and into 2024.
“Private consumption has not solely remained resilient, however current official knowledge revisions point out that the buyer has been in a greater place than beforehand thought, rising the probability of an financial ‘comfortable touchdown,’” Doug Duncan, senior VP and chief economist at Fannie Mae, mentioned in a press assertion. “Nevertheless, regardless of shopper resiliency, the current rise in rates of interest has been precipitous, and in previous environments — even with much less extreme rate of interest shocks — this has led to financial dislocations.”
“As such, we nonetheless count on to see a light financial downturn within the first half of 2024,” Duncan mentioned. “Whereas the speed of inflation has slowed and continues to sluggish, we proceed to take the Federal Reserve at its phrase that charges will probably be ‘larger for longer’ till annual inflation stabilizes on the 2% goal; although presently, partially due to the current run-up in long-term charges, we don’t count on extra Fed fee hikes.”
The group additionally famous that whereas dwelling costs had been resilient by the third quarter, it expects deceleration in 2024 as affordability stays constrained.
