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What Soft Landing?

The economic outlook in the United States is unusually murky, with different sets of indicators telling different stories. But it is entirely possible that inflation will get stuck at a level inconsistent with the US Federal Reserve’s target, reducing – perhaps even to zero – the number of interest-rate cuts this year.

WASHINGTON, DC – Many economists and commentators have been popping champagne corks and toasting the US Federal Reserve for having steered the economy toward a soft landing.

There’s just one problem: the plane has not landed yet.

What would a soft landing look like? Inflation would remain at or adequately close to the Fed’s 2% target for a sustained period, while employment and economic output would increase at rates low enough not to put upward pressure on prices, but also high enough to avoid recession.