Soft landing or no landing, economists weigh in ahead of Fed

on Jan29
by | Comments Off on Soft landing or no landing, economists weigh in ahead of Fed |

Morgan Stanley's Andrew Slimmon shares concerns over soft landing optimism

The Federal Reserve is expected to announce it will leave rates unchanged at the end of its two-day meeting this week, after recent reports showed the economy grew at a much more rapid pace than expected and inflation eased.

“In many ways, we already have a soft landing,” said Columbia Business School economics professor Brett House. “The Fed has threaded the needle of the economy very artfully with a kind of ‘Goldilocks’ scenario.”

Gross domestic product grew at a much faster-than-expected 3.3% pace in the fourth quarter, fueled by a solid job market and strong consumer spending. However, inflation is still above the central bank’s 2% target, and that also opens the door to a “no-landing scenario,” according to Alejandra Grindal, chief economist at Ned Davis Research.

What a ‘no landing’ scenario means

The alternative: A hard landing

According to Higgins, history suggests there could likely still be a recession before this is over.

To that point, 76% of economists said they believe the chances of a recession in the next 12 months is 50% or less, according to a December survey from the National Association for Business Economics.

“It’s normal for an economy to go through periods of expansion and contractions,” Higgins said. “In the short term it will be painful, in the long term we are better off doing what is necessary to return to price stability.”

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