The soft landing of US inflation – la Repubblica

Soft landing: the magical phrase dreamed of by all financial operators, but also by mere mortals, is starting to be whispered in the ears of Americans. It seemed impossible, but the Federal Reserve seems close to the goal of bring inflation under control, without plunging the economy into recession with rate hikes. The coveted soft landing. So after the original sin of underestimating the inflation coming after Covid, the US central bank would have succeeded in the unexpected feat of redeeming itself.

Few believed it, because the rate hikes were too abrupt and the 9% peak in price hikes looked invincible without a crisis. However the US economy grew 2% in the last quarter, inflation fell to 3%, and wages go up faster than prices, but not so fast as to rekindle inflation. Therefore the most pessimistic fear at best a “rolling recession”, ie a lukewarm but not disastrous economy. How did we avoid the worst? Partly because so far the Fed has struck the right balance, and much because our societies have been more resilient, starting with managing the effects of the wicked invasion of Ukraine.

For companies, banks and financial markets, it means better than expected results; for ordinary people, keep their jobs and a decent life; for Biden more likely to be re-elected. But has the danger really passed? There are still risks: an excess of hikes by the Fed, the slowdown by China, Putin’s cruelties such as the halt to the wheat deal. Stopping it would also help save the economy.