Reuters: U.S. Rate Cut Not Expected Until Q4 2024 Due to Strong GDP Growth

Article published: November 13, 2023

IB Economics Syllabus: Macroeconomics (monetary policy, economic growth)

The recent report from Goldman Sachs economists, as covered by Reuters, indicates that the U.S. Federal Reserve is unlikely to cut rates until the fourth quarter of 2024, citing stronger-than-expected economic growth as a key factor. This projection is based on the U.S. economy’s substantial progress towards a soft landing, defying earlier recession fears.

IB Economics (IA) Commentary Suggestions:

In your IA, you could analyze the implications of this delayed rate cut on the broader economy. Focus on the role of monetary policy in managing economic growth and stability. Utilize diagrams such as the AD-AS Model (Aggregate Demand-Aggregate Supply) to illustrate the impact of monetary policy decisions on national output and price levels. Discuss how maintaining current (high) interest rates could influence various economic indicators like inflation, investment, and consumer spending – and thus economic growth. The key economic concept to focus on is change, examining how shifts in monetary policy can lead to significant changes in economic growth and stability.

Source of image: REUTERS/Dado Ruvic/Illustration

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