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US Economy Q4 2023: Nearing Targets

US Economy Q4 2023: Nearing Targets

US 2024 Economic Outlook

Outlook. Throughout the fourth quarter of 2023 the US economy, from an inflation and employment perspective, has been closing in on the Fed targets even though this might mean a reduction in overall growth. As economists at Morgan Stanley state: “In the U.S., growth should slow to 1.9% year over year in 2024 and 1.4% in 2025, down from an estimated 2.4% in 2023, as higher interest rates and tighter monetary policy work their way through the financial system.” The overall expectation is that the US economy will expand slowly but at a faster rate than Western Europe (0.9%).

Recent Situation. The last five years have been an interesting period in American economic history. The 2010s represented the longest period of uninterrupted economic growth in American history until the COVID-19 crisis in 2020 resulted in a short-lived recession. This recession was curtailed by fiscal and monetary policy efforts. After an economic stimulation there can often be a downturn as the economy returns back to where it was before the stimulus was added. Taking a slow economy and speeding it up will result in a short-term boost, but once that stimulus is gone, the economy will return to where it was, sometimes very abruptly, and can lead to a recession. This occurred in the late 1940s in the aftermath of WWII as we returned to a normal level of production. The goal for the past few years has been to reduce the chance of this possibility and it appears that that goal could be realized. “Falling US inflation and prospects for easier Fed policy are increasing talk of a soft landing rather than a recession, hard landing and bear market.” (J.P. Morgan)

Targets. One of the side effects of the stimulus is inflation, which has been the enemy of many consumers and businesses over the last two years. However, as researchers at the Federal Reserve Bank of St. Louis say “The inflation fever that has gripped the U.S. economy since early 2021 appears to be breaking. Still, inflation remains above the Federal Reserve’s 2% target.” This being the case, we should expect to see lower inflation this year in comparison to the last few. Since the US economy has not moved into the target range, the market consensus and Fed commentary drive expectations for the FED to maintain the current interest rates for the first part of the year with reductions coming later. Economists estimate to see the FED drop interest rates in H2. Overall, the higher interest rates have slowed inflation rapidly from 5.9% in 2022 to 2.9% in 2023. “Inflation is falling, but it’s not completely back to the target level. Fed officials have stated that they might tighten monetary policy further to get inflation all the way back to target.” (Deloitte) The Fed continues its work to engineer a soft landing as they shift from high interest rates (currently between 5.25% and 5.5%) to eventually lowering them to around 3.3% in 2024 or 2025.


  • We should expect weaker growth in 2024, (1.5% to 1.9%) not a recession
  • Inflation is falling, but we are still above the target level (2.9%, rather than 2.0%)
  • The US economy is headed for a softer landing rather than a recession

GDP (Trillions of Dollars)

Source: U.S. Bureau of Economic Analysis, Gross Domestic Product [GDP], Federal Reserve Bank of St. Louis. U.S. Bureau of Economic Analysis, Real Gross Domestic Product [GDPC1], Federal Reserve Bank of St. Louis

CPI (Index 1982-1984=100)

Source: U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: All Items in U.S. City Average [CPIAUCSL], Federal Reserve Bank of St. Louis

Central Bank

Source: Board of Governors of the Federal Reserve System (US), Federal Funds Effective Rate [FF], Federal Reserve Bank of St. Louis. Board of Governors of the Federal Reserve System (US), Assets: Total Assets: Total Assets (Less Eliminations from Consolidation): Wednesday Level [WALCL], Federal Reserve Bank of St. Louis


Additional Quotes

The US economy defied recession fears in 2023 and made substantial progress toward a soft landing.

Source: 2024 US Economic Outlook: Final Descent (Mericle)


Many leading indicators point to weaker growth but not a sharp recession.

Source: Eye on the Market Outlook 2024: Pillow Talk.


Looking into 2024, economic conditions are expected to deteriorate modestly, though real GDP growth and the pace of job gains are expected to remain positive, and inflation is expected to decline to around 2.5%.

Source: Slower GDP Growth and Falling Inflation in U.S. Economic Outlook for 2024.

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