Key highlights:

• 2023 Q4 GDP was stronger than expected, and signs are also positive for early 2024 consumption. As a result, we have revised up our GDP growth forecast for 2024 to 2.1% (from 1.6%) although we still see growth slowing in 2024.
• Quarterly core PCE inflation has been in line with the Fed’s 2% inflation target in the last two quarters, although other measures of underlying inflation are tracking higher.
• We now expect that the Fed will start cutting rates slightly earlier (May, previously June). We expect the Fed funds target range to be 4.00-4.25% by end 2024 (previously 4.25-4.50%) and 2.50-2.75% by end 2025 (unchanged).

Find out more in NAB’s US Economic Update (2 February 2024)