Both inflation and consumer prices in the US have been cooling over the past few months, while the job market stays strong. This comes after the Federal Reserve went on an aggressive rate-hiking campaign to try and rein in inflation and avoid a predicted recession in 2023. Karina Mitchell reports from New York. 

Defying many predictions, the U.S. economy escaped recession in 2023. Inflation eased enough for the central bank to pause its rate hikes. U.S. inflation fell to 3.1% in November – ticking down but still above its two percent target.

JEROME POWELL, Chairman, US Federal Reserve "My colleagues and I understand the hardship that high inflation is causing, and we are strongly committed to bringing inflation back down to our two percent goal."

That was the message from the US Federal Reserve at the start of this year. In 2023, the central bank continued its most aggressive rate-hiking campaign in decades. The Fed raised its key benchmark lending rate 11 times since March of 2022, hovering between 5.25 and 5.5 percent since July – it's still higher than it's been in more than 20 years.

Pundits and analysts argued over the Fed's tactics and their expected impact of its aggressive hikes on U.S. growth, labor and American consumers.

JAY HATFIELD, CEO, Infrastructure Capital Advisors "We do think the Fed is fundamentally flawed, that their framework for forecasting is not good."

NICHOLAS ECONOMIDES, Economics Professor, NYU Stern School of Business "I think as far as inflation is concerned I would give Powell A-. He did very well and inflation is down."

Defying expectations, American consumers kept spending despite sky-high interest rates, higher prices for goods and services, and astronomical housing costs. Consumer resilience spurred growth as unemployment remained low.

JAY HATFIELD, CEO, Infrastructure Capital Advisors "All that re-employment gave more money for people to spend. And so the tight U.S. labor market is actually making the U.S. more resilient because again, normally it's a cascade of less investment, less employment and then the consumer spending less. So, we don't have that problem this time."

More economists now have a favorable outlook for the American economy in 2024.

MARK HAMRICK, Senior Economic Analyst, Bankrate "I think it's increasingly likely the US economy will avoid a soft landing because it won't be landing at all – meaning we'll avoid a recession, and we'll have growth that continues closer to the longer-term trend of 2% on an annualized basis."

Both Economides and Hatfield believe the focus in the new year will shift to rate cuts-as the Fed continues its fight against inflation. In its final meeting of 2023, Fed officials projected three cuts in 2024.

Hatfield thinks there will only be two cuts next year. In response, he expects more investment in small caps and S&P 500 companies.

KARINA MITCHELL, New York "We've seen a rally the last several weeks. You're looking for 2024 to end above 5000-at 5100. That's the high end of the consensus. So, you're bullish on 2024."

Jay Hatfield: "Absolutely."

He also believes there are no real credit risks to banks after three regional bank failures in the US earlier this year. But Economides believes it won't be all smooth sailing – even for bigger banks.

NICHOLAS ECONOMIDES, Economics Professor, NYU Stern School of Business "The good news for them is they are highly profitable. So, within a couple of years the losses will be over-wiped out by the profits, but what happens over the next couple of years, there is some danger for banks even big ones like Bank of America."

And many experts say the global economy could face major headwinds from a potentially volatile U.S. presidential election and from the conflicts between Russia and Ukraine and Israel and Hamas.

JAY HATFIELD, CEO, Infrastructure Capital Advisors "That's clearly a risk, particularly when you have two wars going on, each of which could disrupt the energy markets."

NICHOLAS ECONOMIDES, Economics Professor, NYU Stern School of Business "The domestic politics in the United States are significantly affected for a change by the world situations. Usually they are not, but right now they are."

Hamrick says U.S. fiscal policy could also pose a risk to the global economy next year.

MARK HAMRICK, Senior Economic Analyst, Bankrate "Officials have only been able to address in Congress essentially kicking the can down the road for a short amount of time with respect to funding the government and have not been able to summon the political will to resolve the long-term fiscal challenges that the U.S. faces."

Karina Mitchell, CGTN, New York.