Inflation down, Soft Landing Odds Improve

The odds of a soft landing, in which inflation returns close to the Fed’s 2% target without a recession, are improving. 

Even though the Fed has raised interest rates 5 percentage points since early 2022, the impact seems to have faded. The stock market isn’t far from a record high, and housing activity has rebounded. Wages are still growing at 4% to 5% a year, a percentage point faster than is consistent with 2% inflation. 

Greg Ip WSJ 13 July 2023

https://www.wsj.com/articles/as-inflation-goes-down-soft-landing-odds-improve-5166e6af

Predictions of a “soft landing” seem both premature and hard to square with some of the data.

First, inflation is still high. It has come down from its 8.9% peak, to 3%. But the US Federal Reserve has said it will not stop its contractionary policy until inflation is at 2%, so rates will almost certainly continue to increase.

Consider that high rates have not yet worked their way through the economy, especially in such sectors as commercial real estate. Corporations and commercial real estate developers are still coasting on the low rates they got on their loans a few years ago. In the next year or two, however, both these sectors will have to refinance at much higher rates.

Allison Schrager Bloomberg 13 juli 2023

https://www.bloomberg.com/opinion/articles/2023-07-13/recession-yes-it-is-still-a-possibility