The Economist: it is too early to hail a “soft landing”
News that America’s headline rate of annual inflation fell to 3% in June has fed hopes that the Fed’s next rate rise, which is expected on July 26th, will be its last and that other central banks might relax, too.
Inflation, though lower, remains far above central banks’ 2% targets.
The fall in America’s headline rate has been driven by a one-off decline in energy prices: exclude food and energy, and prices are 4.8% higher than a year ago.
In the euro zone the figure is 5.5%, and in both economies wages are still growing far in excess of productivity growth.
In other words, the rich world has some way to go before it is fully disinflated—and many economists expect the last mile to be the hardest.
Though stubborn inflation of, say, 3-4% does not grab headlines as much as recent alarming price rises, it would still be a problem for central bankers.
The Economist 22 July 2023
The world economy is still in danger (economist.com)
Could America’s economy escape recession?
The route to a soft landing is narrow
In the past couple of weeks, though, the mood has shifted. Despite the many ill omens, the most important indicator of the economy’s health—the labour market—has remained amazingly resilient. The unemployment rate sits at just 3.6%, a smidgen above a five-decade low. A brief rise in claims for unemployment insurance during the spring has petered out. America has added new jobs for 30 consecutive months, lifting total employment to about its pre-pandemic level.
At the same time, inflation is receding.
To say that the combination of ebbing inflation and a robust labour market is unexpected is an understatement: many economists had assumed it was impossible.
In the decade before the pandemic the Phillips curve had come into question, because inflation remained quiescent even though the jobless rate plunged. But the resurgence of inflation last year brought the Phillips curve back into fashion
The Economist 22 July 2023
Could America’s economy escape recession? (economist.com)
Kommentarer