A Soft Landing Is in Sight, But Can the Fed Stick It?
A surprising month of positive data, particularly on retail sales, suggest that consumers can help the economy avoid a recession if central bankers don’t bungle it.
A tricky target.
Photographer: Michael Dodge/Getty Images
If the last few weeks are any guide, the coveted soft landing for the economy may be coming into view. But even if the perfect scenario presents itself, that doesn’t preclude policymakers at the Federal Reserve from squandering the opportunity.
Consider the almost fairy-tale sequence of economic data published since the start of the month: Inflation has been ebbing at both the wholesale and consumer levels; average hourly earnings have been moderating to lay the groundwork for easing price pressures going forward;1 and retail sales have been consistently decent. That final development is critical. To achieve a soft landing, policymakers need consumer spending — the engine of the US economy — to stay buoyant just long enough for inflation to ebb and central bankers to reverse interest-rate increases.