The latest statement from Deutsche Bank raised market hopes as they no longer expect the U.S. economy to slip into recession this year. Additionally driven by factors such as inflation slowing and the labor market returning to a "better balance" without unemployment rising significantly.
Deutsche Bank previously expected the economy to potentially be mired in recession with the Federal Reserve tightening interest rates to control inflation, narrowing the scope for a soft landing.
Deutsche Bank said in a note on Monday that it now expects the US economy to grow by 1.9% this year, on a quarterly average, compared to its previous forecast of 0.3%.
"Although the economy still faces several headwinds in particular, tight credit conditions, rising consumer arrears rates, and a sluggish labor market with resilience so far suggests a better slowdown in 2024 than we previously expected," said Matthew Luzzetti. , Deutsche Bank's chief US economist.
Deutsche Bank still expects the Fed to start cutting interest rates from June, but now expects a 100 basis point (bps) rate cut this year, less than the previous expectation of 175 bps.
The US economy grew by 3.3% in the fourth quarter, faster than expected, amid strong consumer spending, with growth for the full year of 2.5%, defying gloomy forecasts of a recession after the Fed's aggressive rate hike.
