The holidays are here and while many terminologies may be well-known in the finance space, it’s safe to assume that not everyone at the dinner table will be in the know. Aditya Bhave, BoFA Senior U.S. Economist joins Yahoo Finance Live to give tips on how to explain Federal Reserve’s talk, and other economic changes that are to come in 2024.

Bhave suggests keeping it simple is key by explaining why the Federal Reserve has a tough job ahead. “I think we need to explain that the Fed is trying to strike a balance here," Bhave says.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

JULIE HYMAN: So most consumers, when they go to the store, when they-- not necessarily when they buy gasoline, that's getting a little bit better, but they're still feeling those higher prices, right?

ADITYA BHAVE: Yeah.

JULIE HYMAN: And so when you're sitting around that holiday table, how do you explain Fed policy to laypeople, right? It's not always an easy thing to do.

ADITYA BHAVE: Right. So I think we need to explain that the Fed is trying to strike a balance here. They're trying to slow down inflation and again they're not trying to bring prices down, because, in order to do that, to cause actual deflation, they'll probably have to inflict a lot of pain on the economy. They're trying to maintain 2% inflation while also ensuring maximum employment, right, which is basically maintaining a strong labor market.

And that's a difficult balance to strike. And that's why I think their job is so difficult.

JOSH LIPTON: And so while we have you, I got to ask you, what is your outlook then for the US economy in 2024? What are you seeing?

ADITYA BHAVE: So we're looking for a soft landing. And we recently revised our outlook to something even more benign. We now think that on a 4Q-over-4Q basis, the economy will grow at about 1.2% next year. That is a slowdown from the 5% that we just saw, but it's in line with the recent figures that we're seeing for the fourth quarter. It's below trend, but it's probably just fine, right?

We have the Fed hiking-- sorry, cutting rates four times next year, once per quarter starting in March. And we have inflation, the core PCE, which is what the Fed watches coming down to 2 and 1/2% by the end of next year. So things have moved in the right direction. The inflation data have been more encouraging than we were expecting. And I think the Fed's reaction function has also been more dovish than we were expecting. So it's the combination of those two factors that has led to our forecast changes.