The Fed's Fabled Soft Landing? It's Actually Happening
By avoiding an imminent recession, the central bank’s focus now shifts to sustaining the expansion.
Federal Reserve Board Chairman Jerome Powell has the economy on the right track
Photographer: Andrew Caballero-Reynolds/AFP
The Federal Reserve seems to be achieving the fabled soft landing. With growth likely to transition down toward the longer-term trend in 2019, expect monetary policy to remain on hold for the foreseeable future. If the Fed were to move, the odds still favor an interest rate cut over an increase. We are likely at the peak of this rate hiking cycle.
Recent commentary centers around a consensus that the current policy rate of 2.25 percent to 2.50 percent is just about right. To be sure, not everyone thinks this is exactly correct. Economists at Goldman Sachs think the next move is a notch higher, but not until late 2020. Allianz chief economic advisor and Bloomberg Opinion contributor Mohamed El-Erian thinks the Fed has swung “too dovish.” Former Minneapolis Federal Reserve President and Bloomberg Opinion columnist Narayana Kocherlakota argues the Fed should cut rates to preserve the expansion. Different ideas about the direction of rates, but all suggestive of fairly minor adjustments to the current policy setting.