My Blog
Real Estate

The Fed could pull off a soft landing, here’s what that means for you


The likelihood of a soft landing is extremely high, says Rockland's David Smith

The Federal Reserve is expected to announce it will leave rates unchanged at the end of its two-day meeting this week after recent signs the economy is in fairly good shape and as inflation continues to drift lower.

“While there’s been talk about an imminent recession going back to early last year, the U.S. economy has remained substantially more resilient than expected,” said Mark Hamrick, senior economic analyst at Bankrate. 

“A soft landing appears to be the greatest likelihood for next year,” he said. However, the economy isn’t out of the woods just yet, he added, and “a mild and short recession can’t totally be ruled out.”

More from Personal Finance:
These credit cards have had ‘increasingly notable’ high rates
‘Cash stuffing’ may forgo ‘the easiest money’ you can make
Student loan borrowers reenter ‘messy system’

Even though inflation is still above the central bank’s 2% target, markets have already been pricing in the likelihood that the Fed is done raising interest rates this cycle and is now looking toward potential rate cuts in 2024.

For consumers, that means relief from high borrowing costs — particularly for mortgages, credit cards and auto loans — may finally be on the way as long as inflation data continues to cooperate.

And yet, “continued slowing in inflation doesn’t mean price decreases, it means a price leveling,” said Columbia Business School economics professor Brett House.

Hope for a ‘softish’ landing

If the central bank can continue to make progress toward its 2% target without bringing the economy to a more abrupt slowdown, there is the possibility of achieving the sought-after “Goldilocks” scenario.

In that case, the economy would grow enough to avoid a recession and a negative hit to the labor market, but not so strongly that it fuels inflation.

For consumers, that means “we are likely to see interest rates come down slowly and growth to remain relatively robust and we are likely to see the jobs market remain relatively strong,” House said.

For some, that expectation may be too optimistic.

“While we also expect a softish landing, the pace of the recent rally in stocks and bonds looks unlikely to be sustained,” Solita Marcelli, UBS Global Wealth Management’s chief investment officer Americas, wrote in a recent note.

“Equity markets are already pricing in plenty of good news, pointing to an unrealistic level of confidence from stock investors,” Marcelli said.

Markets are now even showing a roughly 13% chance of a rate cut as early as January, according to the UBS note.

Fears of a hard landing

Related posts

Seeking a Manhattan Studio With Design Potential for $600,000. Which Option Did He Choose?

newsconquest

Here’s what the Federal Reserve’s half-point rate hike means for you

newsconquest

China signals more support for real estate with a ‘big change’ in tone

newsconquest

Leave a Comment