Right now, some economists—not a majority but more than a few—think the Fed can deliver a “soft landing.” That would mean inflation drops to a more tolerable level, unemployment doesn’t rise much from today’s historic lows, and a mild recession, if one happens at all.
Possible? Yes, it’s possible, but I wouldn’t call it likely.
I get tired of saying this, but someone obviously needs to:
“Hiking at a slower pace” is not the same as “pausing.”
“Pausing” is not the same as “cutting.”
Higher interest rates keep working even after they stop rising.
The longer they stay high, the more economic activity they suppress, the more loans get reset at less manageable levels, and the more cash that would have gone into consumer spending goes toward debt service instead.
All this adds up and will keep adding up for a long time—possibly years.
John Mauldin 27 January 2023
A soft landing - possible but unlikely. En mjuk landning - möjlig men osannolik
En mjuk landning - möjlig men osannolik. Wolf och Dudley