Threat of an imminent US recession has faded, according to the University of California Los Angeles Anderson Forecast.

The forecast cites expansionary fiscal policy, new national industrial policy and a consumer that keeps on spending. On the other hand, growth will be tempered as interest rates remain high. The forecast also notes inflation rates will recede, but only slowly.

It expects fourth-quarter GDP growth of 1.7%, down from the 4.8% growth seen in the third quarter.

In addition, the forecast sees a weaker 2024 with three quarters of 1.0%, reflecting the effects of higher interest rates on consumption, housing and business investment. But growth will pick up to 2.5% by the end of the forecast horizon in 2025.

The forecast does not expect the Fed to increase the effective federal funds rate for the balance of the year. It expects the Fed to hold the rate where it currently is until sufficient weakness in the economy, which the Anderson Forecast expects in mid to late 2024.

“The impact of higher interest rates will be felt in restraining growth in 2024,” according to the report. “Inflation is slowly working its way back to the neighborhood of 2.8% per annum primarily because of residential rents, automobile repair and new health insurance premiums.”

Still, there are risks to the forecasts. They include a protracted government shutdown and other geopolitical events as well as potential uncertainty about the US election in November 2024.