Economists Point To Signs Of ‘Soft Landing’ For US Economy Despite Inflation Concerns

Despite worries about the impact of rising interest rates and high inflation, some economists and Federal Reserve officials are suggesting that the U.S. economy may be on track for a “soft landing.” This scenario would involve slowing the economy and inflation without triggering a recession.

Research presented at an Atlanta Fed conference on Amelia Island, Florida, this week highlighted various ways in which the economy is behaving differently than in previous cycles. For example, a study by Philipp Schnabl, a professor at New York University’s Stern School of Business, indicated that investment losses in bank bond portfolios during the past year of rising interest rates were largely offset by the benefits of cheap deposits keeping core bank operating margins steady.

Chicago Fed President Austan Goolsbee cautioned against mocking the idea of an “immaculate disinflation,” suggesting that unwinding the unique influences of the COVID-19 pandemic “gives us some potential to have a ‘soft landing’ of a form that would definitely be unusual.”

Economists like Jan Hatzius, chief economist at Goldman Sachs, expressed optimism about the economy continuing to expand even as inflation subsides. Hatzius pointed to an “unprecedented” break in the job market, with a steady drop in job openings without a corresponding rise in the unemployment rate.

While uncertainties remain, some policymakers and economists believe that the idiosyncratic nature of the current economic cycle may allow for a more favorable outcome than historical patterns might suggest.