In mid-September, the American Bankers Association’s Economic Advisory Committee said there’s a growing chance the U.S. economy might avoid a recession despite its slowing growth, and instead achieve the “soft landing” many economists have hoped for. But the economy still faces tough times ahead, the economists stressed.

“The tone of the forecast and the tone of the conversation certainly felt much more positive today than it did six [or] nine months ago,” said Simona Mocuta, committee chair and chief economist at State Street Global Advisors, during a virtual press conference. “As a consensus for the committee, certainly the odds of a soft landing have improved quite dramatically in the near term.”

While the committee, which is made up of 14 chief economists from the largest banks in North America, is optimistic, there is concern about the economy’s resilience as interest rates rise, Mocuta said.

The committee did not see any improvements on the horizon when it came to inflation, but it was forced to change its economic growth predictions from earlier in the year, saying it had not anticipated that economic resilience, Mocuta said.

Nevertheless, she added there would be a period of “sub-trend” growth, and the committee has forecast a slowdown in real economic growth to less than 1% annualized over the next three quarters, which is down from 2.1% annualized during the first three quarters of 2023.

There will be a positive momentum shift for growth at the start of 2024, although it’s still below the economy’s overall potential, the committee said.

There was division among the committee members over the actions of the Federal Reserve. While some believe the Fed’s tightening cycle ended with the last rate increase, others are not as convinced.

“There were a couple of members who thought it would be more prudent for the Fed to deliver a little bit more tightening” amid the still formidable economy and “as an insurance policy,” Mocuta said.

However, the committee is anticipating that about 100 basis points in rate cuts will be made over the course of 2024.

Given the economy’s endurance, the committee believes the chances of a recession have diminished somewhat, though they are still significant at almost 50% for 2024.

A recession could result from “the delayed impact of monetary tightening, deteriorating credit availability and high credit costs,” the committee said in its report. There’s also a risk of prolonged government shutdown or newly flaring geopolitical tensions, the committee said in a statement.

A strong labor market has been one of the reasons for the economy’s endurance, as unemployment has remained steady, though it’s not at the historic lows it enjoyed a couple of years ago. The committee expects to see an uptick in unemployment, though Mocuta described it as minor.

“There will be a loss of momentum, but not so much where you are feeling genuine broad-based pain,” she said, though it would be enough “to facilitate ongoing disinflation.”

Looking ahead, the biggest risk factor to the economy continues to be excessive monetary tightening. While a pending government shutdown could cause a problem, monetary tightening has broad-based implications across the economy, Mocuta said.