AI Stock Market Correction Poses ‘Key Downside Risk’ to U.S. Economic Growth: OECD Report
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U.S. Economic Growth to Slow, Inflation Expected to Rise
The U.S. economy is projected to experience slower growth and a rise in inflation next year, according to a forecast released Tuesday by the Association for Economic Co-operation and Development (OECD). The report cites a weakening labor market and persistent price pressures from tariffs as contributing factors.
The OECD projects U.S. economic growth of 2% in 2024, declining to 1.7% in 2026 before a modest recovery to 1.9% in 2027.
AI-Driven Stock Market Bubble a Significant Concern
However,the OECD’s outlook carries a stark warning: a potential correction in equity markets fueled by the current enthusiasm surrounding artificial intelligence (AI) investments represents a “key downside risk” to the projected growth.
“A key downside risk to the projection is a correction to equity markets that have been buoyed by the hopes of high returns to investment in AI, although new advances in AI could boost growth in the years ahead,”
OECD Report, May 2024
While acknowledging the potential for AI advancements to stimulate growth in the future, the report emphasizes the vulnerability of current market valuations to a potential downturn.
Inflation and Interest Rate Considerations
the OECD anticipates inflation will increase to 3% in 2025, up from 2.7% in 2024. despite this projected rise, the organization suggests that further interest rate cuts “appear warranted.”
- Weakening employment growth is a key factor influencing the call for potential rate cuts.
- The ongoing impact of tariffs on prices continues to contribute to inflationary pressures.
This is a developing story and will be updated as more information becomes available.
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