The Economic Advisory Committee of the American Bankers Association (ABA) this week released a forecast indicating a decreased risk of recession, with inflation expected to moderate and employment gains to remain strong. The committee also predicts a transition to a soft easing cycle by the Federal Reserve, commencing around mid-year.

According to the ABA, the committee projects real economic growth to stabilize at 1.7% for 2024, subsequently rising to 1.8% in 2025. The ABA suggests that while the probability of the nation entering a recession has diminished over the past six months, it maintains the risk at 30% for both 2024 and 2025.

The committee, consisting of 16 chief economists from large U.S. banks, anticipates a gradual easing towards the Federal Reserve's 2.0% inflation target by late 2025. They expect core personal consumption expenditures (PCE inflation) to reach 2.4% by the end of 2024 before declining to 2.1% by the close of 2025.

However, according to the ABA statement, there is an anticipated slowdown in job creation—from approximately 139,000 per month in 2024 to roughly 117,000 in 2025—and an increase in unemployment rate to about 4.1% by year-end of 2024.

"Last year's combination of resilient growth and moderating inflation is unusual historically and should be celebrated," said Simona Mocuta, committee chair and chief economist at State Street Global Advisors. 

"The elements appear in place to extend a milder version of this in 2024, although we should not take this for granted. The risks to the outlook are two-sided but nuanced. The committee sees risks to the growth forecast as fairly balanced, but risks to the inflation forecast remain skewed to the upside.”