Soft Landing Optimism Is Everywhere. That’s Happened Before.
Inflation has begun to cool meaningfully, but unemployment remains historically low at 3.6 percent and hiring has been robust. Consumers continue to spend at a solid pace and are helping to boost overall growth, based on strong gross domestic product data released on Thursday.
Given all that momentum, Fed staff economists in Washington, who had been predicting a mild recession late this year, no longer expect one, said Jerome H. Powell, the central bank’s chair, during a news conference on Wednesday. Mr. Powell said that while he was not yet ready to use the term “optimism,” he saw a possible pathway to a relatively painless slowdown.
But it can be difficult to tell in real time whether the economy is smoothly decelerating or whether it is creeping toward the edge of a cliff — one reason that officials like Mr. Powell are being careful not to declare victory. On Wednesday, policymakers lifted rates to a range of 5.25 to 5.5 percent, the highest level in 22 years and up sharply from near zero as recently as early 2022. Those rate moves are trickling through the economy, making it more expensive to buy cars and houses on borrowed money and making it pricier for businesses to take out loans.
Such lags and uncertainties mean that while data today are unquestionably looking sunnier, risks still cloud the outlook.
“The prevailing consensus right before things went downhill in 2007, 2000 and 1990 was for a soft landing,” said Gennadiy Goldberg, a rates strategist at TD Securities. “Markets have trouble seeing exactly where the cracks are.”
Source: The New York Times
