Prepare for USA Great Soft landing... No Recession, no fear

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Soft landing, no recession,' Bank of America now predicts. Here's what consumers can expect​

PUBLISHED FRI, AUG 4 2023 2:57 PM EDT

Lorie Konish
@LORIEKONISH
WATCH LIVE

KEY POINTS

• Some experts are backing off their predictions that a recession may be looming.
• The latest economic data points to the possibility of a soft landing for the U.S. economy as the Federal Reserve works to tamp down inflation.
• However, consumers would be wise to watch for changes in inflation, the labor market and interest rates in the coming months, experts say.

Unemployment and other factors — growth in economic activity, wage and price pressures in the "right direction" — prompted Bank of America to reassess its previous calls for a mild recession in 2024.

While the firm is weighting those baseline expectations for a soft landing at 45% to 50%, other outcomes are still possible.

"We still think the most likely alternative is a mild recession," said Michael Gapen, head of U.S. economics at Bank of America, which the firm puts at odds of 35% to 40%.

Meanwhile, the most optimistic outcome, with stronger GDP growth, comes in at 10% to 15%.

Recessions historically tend to be caused by black swan events — unpredictable circumstances that come as a surprise — that are difficult to precisely forecast, noted Mark Hamrick, senior economic analyst at Bankrate.

"I don't have much confidence at all in the ability to predict the timing of a recession unless there's an event that's right in front of us that suggests that one is imminent," Hamrick said.

 

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Predictions that a recession may be looming for the U.S. economy have so far not come to fruition. Now, some experts are backing off the prediction altogether, including Federal Reserve staff economists.

"What's out: Mild recession," states new economic research released by Bank of America this week.

What's in: Soft landing, no recession," the firm's research declares.

Economists and other experts have been calling for a downturn for a more than a year now, mostly due to high inflation and the steps policymakers have been taking to curb it. Officially, a downturn is defined as defined as a decline in gross domestic product for two consecutive quarters.

As the Federal Reserve has embarked on a series of interest rate hikes to bring inflation down to its 2% target, the concern has been that may tip the economy into a recession.

Inflation has subsided, though it is still above 2%, per the latest government data.

The unemployment rate is still at "near all-time lows," Bank of America noted. Friday's jobs report showed the unemployment rate was 3.5% based on new July data, "just above the lowest level since late 1969."

 

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https://sg.finance.yahoo.com/video/...ACqf4Gd6CSiZJrMQj8CxbJ2KCNagVd-qs36O-rJOyvLY7

 

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https://www.washingtonpost.com/busi...e9e8fe-304d-11ee-85dd-5c3c97d6acda_story.html

 

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To assess the chances of a soft landing, one must consider three questions.

First, will the effects of the Fed’s tightening keep mounting, thanks to lags in monetary policy?

Second, once those lags have played out, will the Fed’s stance be sufficiently tight to keep growth in check?

And third, does the unemployment rate need to go much higher to bring inflation back down to the Fed’s 2% target?

 

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Economics

El-Erian Says Soft-Landing Narrative Gains Steam, Don’t Fight It​

• Inflation data is supporting that view, economist says
• He says recession can be skirted, if Fed doesn’t over tighten

Gift this article




El-Erian Says Fed Should Be 'One and Done' on Rate Hikes





“If you want to get to a 2% inflation target quickly you will make a policy mistake,” Mohamed El-Erian, chief economic adviser at Allianz and Bloomberg Opinion columnist, warns on “Bloomberg The Open.” El-Erian’s opinions are his own.Source: Bloomberg


By Vildana Hajric and Jonathan Ferro
July 14, 2023 at 10:21 PM GMT+8


The idea that the US economy could slowdown just enough to skirt a recession is so strong that it doesn’t make sense to go against it, according to Mohamed El-Erian.


“You cannot get in the way right now of the soft-landing narrative — that narrative is building momentum,” the chief economic adviser at Allianz SE and a Bloomberg Opinion columnist said Friday. “Everything we’ve seen so far this week — CPI, PPI, the banks — has all been about a soft-landing narrative.”