Recession unlikely this year, while interest rates should stay elevated, banking exec says

A banking executive with Pine Bluff, Arkansas-based Simmons First National Corp. (Nasdaq: SFNC) said continued strength in the U.S. economy should stave off concerns of a recession in 2025, even as interest rates likely will stay higher this year.

The comments were part of the bank’s economic outlook presentation, made this year in Springfield at Hickory Hills Country Club on Feb. 27. Officials said it was the fourth year for the outlook event, which the bank delivers in various markets it serves. Simmons Bank has over 220 branches in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas, including four in the Queen City.

Jason Waters, chief investment officer with Simmons Bank, said consumers are still spending and GDP continues to show growth. Real gross domestic product was up at an annual rate of 2.3% in the fourth quarter last year, according to the U.S. Bureau of Economic Analysis. The prior quarter was up 3.1%.

“Generally speaking, with all that stimulus, we’ve still got a big money supply growth. We’ve still got federal spending,” he said. “We think the economy’s going to stay strong through the rest of this year unless something unexpected happens.”

As for the Federal Reserve, Waters said interest rate cuts likely will not be abundant this year as inflation continues to remain persistent over the 2% target the agency desires. As of January, the inflation rate was 3%, according to the U.S. Bureau of Labor Statistics.

“Right now, it looks like the Fed is not going to cut rates again, at least for the next couple of meetings, based on the data we’re seeing,” he said.

Two rate cuts also were the estimate from Kurt Rankin, a senior economist with Pittsburgh, Pennsylvania-based PNC Financial Services Group Inc. (NYSE: PNC), when he spoke Feb. 25 in Branson at the fourth annual Midwest Manufacturers Trade Show & Conference, according to past Springfield Business Journal reporting.

Part of the concern, Waters said, is that the federal government is spending too much money and driving up the national debt at a rapid pace. He said roughly 15%-20% of GDP annually comes from federal receipts and was at nearly 17% as of third-quarter 2024. However, government spending was 23% in the same quarter.

“So, 6% of GDP doesn’t sound like a lot, but that’s like $2 trillion a year that we’re spending above and beyond,” he said. “We know what happens. It leads to deficits, which leads to debt.”

The U.S. national debt is over $36.5 trillion and rising, he said, noting “out-of-control federal spending” is arguably the greatest threat to our country right now.

“This is a big problem. And at some point, this is going to show up in interest rates,” he said. “It’s going to show up in a lot of different things.”

Waters said whether people like or hate Elon Musk, it’s good that the federal budget is getting the attention it deserves through the Department of Government Efficiency, the new agency he oversees in President Donald Trump’s administration. Still, the department’s goal to cut $2 trillion from the annual federal budget seems unlikely, what with mandatory spending for programs such as Medicare, Medicaid and Social Security, Waters said.

“Changing entitlement spending is going to be a very uphill battle. Trump can’t do that on his own. That’s by law,” he said. “It’s very difficult to make the case that we can find $2 trillion. Reform is going to have to happen. That’s the only way it happens.”