Barron’s Roundtable: US Economy Enters 2025 with Optimism
The US economy entered 2025 with a steady hand, according to the National Association of Business Economics, with the chance of a recession declining. The organization’s January Business Conditions Survey found that the odds of a recession continue to diminish, with downside risks largely tied to uncertainty over the implementation and timing of policy proposals from the new administration.
President Donald Trump, who took office a week ago, has already made his presence felt, rolling out a series of pro-business executive orders aimed at making the US more open to cryptocurrency, easing energy restrictions, and freezing the hiring of federal workers. He also announced a $500 billion investment from OpenAI, Softbank, and Oracle to expand artificial intelligence in the US.
However, inflation remains a headwind, with 35% of NABE’s economists expecting price increases over the next three months, up from 28% in October. The consumer price index rose 2.9% annually in December, while core CPI, which excludes volatile food and energy, rose 3.2% annually.
During his speech at the World Economic Forum in Davos, Switzerland, Trump blamed the Biden administration for high inflation, saying that the government’s wasteful deficit spending and energy restrictions were the cause. He also took a jab at Fed Chair Jerome Powell, calling on him to drop interest rates immediately.
Despite the uncertainty surrounding the new administration’s policies, many economists expect the Federal Reserve to leave interest rates unchanged at its meeting on Wednesday, keeping the Federal Funds Rate between 4.25% and 4.50%. The GDP for the fourth quarter is expected to rise 3%, in line with the 3.1% reported in the third quarter.