A US Soft Landing?

Unless 3.6% unemployment is the new normal, the central bank has more tightening to do.  

Markets are displaying increasing optimism that the US will experience a rare “soft landing,” in which inflation falls back to 2% and the economy cools without dipping into recession.

If there’s no more tightening in the pipeline, then proponents of the soft-landing scenario must believe that the Fed has done enough. Yet the persistent tightness of the labor market suggests otherwise.

Unfortunately, the non-accelerating inflation rate of unemployment, or NAIRU, is hard to know. 

Fed officials estimate it at between 3.8% and 4.3%, down from 5.2% to 6.0% ten years earlier

A hard landing might simply have been deferred, not avoided.

Bill Dudley Bloomberg 1 August 2023

https://www.bloomberg.com/opinion/articles/2023-08-01/a-us-soft-landing-even-the-fed-doesn-t-believe-it

 

Non-Accelerating Inflation Rate of Unemployment, shortened to the unlovely acronym Nairu

Englund: Non-Accelerating Inflation Rate of Unemployment, shortened to the unlovely acronym Nairu (englundmacro.blogspot.com)

R-star and predictions that inflation and rates will fall to pre-pandemic levels

Englund: R-star and predictions that inflation and rates will fall to pre-pandemic levels (englundmacro.blogspot.com)