Quarterly Outlook: Inflation Continues to Moderate, Fed Policy Shifts

Main Takeaway

The economy has remained resilient, with strong real GDP growth in the second quarter and inflation easing in the U.S. and globally. However, the economy is beginning to show some signs of stress, as unemployment has started to tick up and job growth has slowed. Against this backdrop, Federal Reserve Chair Jerome Powell signaled a significant policy shift was appropriate, with the Fed cutting the federal funds rate 0.50% at its September meeting.

Top Risks

With their recent rate cut, Fed policymakers signaled that they believe a slowing U.S. economy is becoming the primary risk. Moving forward, the markets will be watching consumer spending and unemployment closely to determine if the Fed can engineer a soft landing. U.S. national debt continues to be a concern with the debt-to-GDP ratio approaching 100%. A protracted outcome to the U.S. presidential election could lead to additional market volatility.

Sources of Stability

Globally, inflation continues to moderate with the Fed now joining other central banks, such as Bank of Canada and the European Central Bank, in reducing their respective target interest rates. The combination of lower interest rates and strong wage growth is expected to spur businesses and consumers to increase spending. Although unemployment has begun ticking higher, this is likely because more people are returning to the workforce as permanent layoffs have stayed relatively constant.

For our latest perspectives on markets and economic conditions, view our Quarterly Outlook for Q4 2024.

For informational and educational purposes only and should not be construed as specific investment, accounting, legal or tax advice. Certain information is based upon third-party data, which may become outdated or otherwise superseded without notice. Third-party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio nor do indices represent results of actual trading. Information from sources deemed reliable, but its accuracy cannot be guaranteed. Performance is historical and does not guarantee future results. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this article. Please be advised that Buckingham only shares video and content through our website, Facebook, LinkedIn page, and other official sources. We do not post investment advice on WhatsApp, Telegram, other interactive applications, or other similar platforms. Rather, Buckingham provides investment advice only through individualized interactions. R-24-7753