Soft landing appears likely

Soft landing are hardly “impossible”.

Blinder was vice chairman at the Federal Reserve in the 1990s, when the central bank engineered the perfect “soft landing”…

He’s looked closely at the 11 periods between 1965 and 2020 in which the Fed raised interest rates. While the perfect soft landing happened only once, the economic fallout in six of the other cycles was limited with little or no decline in GDP and only a modest rise in unemployment.

“The moral of the story to me was, softish landings are not as rare as was thought,” Blinder says.

Five other periods of interest rate hikes were followed by severe recessions. But in three of those cases, Blinder argues the central bank wasn’t even trying for a soft landing…



Wall Street famously suffers from myopia. They can hardly see beyond the most recent numbers. Yes, they are now much more optimistic. But that is not cast in concrete. About as reliable as quicksand.

Don’t count on it!!


At the same time, the Fed says that a recession is not their base case.


Wall Street makes its money by charging commissions. The more churn the more profit. Next quarter churns more than long term.

Rinse/repeat, rinse/repeat, rinse/repeat, rinse/repeat, rinse/repeat, rinse/repeat.

And people want to hear the latest news and why stocks moved. Talk about shooting yourself in the foot.

The Captain

BTW, short term calls make more money than longer term and LEAPs. Counting on the Santa Claus rally this is what today’s trades might look like, the longest is just five weeks…


Commercial real estate and with it the equity and bond markets could falter next as we get into the winter.

Guess what that is not a recession. The markets are only seasonality. Commercial real estate is just a sector or two depending on how you view different parts of the markets.

The labor pool is being hired preemptively as much higher GDP growth rates are expected certainly by 2H24.

Demand-side economics is fantastic for the US economy.

The folks who thought supply-side economics made sense were looking at simplistic crapola. Pandered to with lies.

Well, I am a cynic. While everybody is standing around congratulating each other and clapping everyone on the back, I am in the corner saying “the landing isn’t a landing until you’ve landed.” The Fed has managed only the first half of a “soft landing”, that is, bending the upwards inflation curve to level and then downwards.

Given the lag time between Fed action and “result”, we have a long way to go before we’re sure these interest rate increases haven’t launched us into recession (which will take another series of aggressive rate reductions to ameliorate.)

Everyone is happy about the “soft landing.” Hey guys: the plane is still in the air!


Maybe “soft landing” is like “transitory inflation”. It always happens (and therefore you are always correct) as long as you have the ability to redefine the time period as you go along. :sweat_smile:

I suppose I should mention that I believe the Fed acted for too long, and kept increasing rates more than they should have. I say that because I think a fair part of the inflation surge was, in fact, temporary, brought on by dislocations in supply chains, shortages, short term profiteering, and yes, too much money chasing scarce goods. That may or may not be true, of course, but I hold to the conviction that the last two increases (at least) were unnecessary.

We are about to enter another “artificial” inflation measurement period. The big surge in housing prices is past (a few specific locations not included, of course) and 35% of the CPI is measured by “equivalent rent”, a wholly fictitious number for the great majority of homeowners, and somewhat irrelevant for apartment dwellers with longer term leases (admittedly a minority.) There is a business component for retail and other lessees as well, I believe.

With the “equivalent rent” component working against a 12-month historical number, as it turns out the short-term but dramatic increases are now rolling off the back end of the calculation - meaning that without doing anything the “official” inflation number will come down, even as nothing is changed. (Add to that the resumption of student loan payments, just started last month, and there may be a significant “real” component of drag, at least following the holiday season in the late winter/spring.)

So: inflation is coming down. Except it’s already come down in reality. Rents are retreating. Many foodstuffs are coming back, albeit slowly. Car prices are down, used car prices are down. Most appliances and large hard goods actually cost less than they did last year. Oil and gas are down. Travel is down. Services are still up (given their greater dependence on wage costs), but even that is moderating.

Take advice from Yogi: It ain’t over ‘til it’s over. And it ain’t over.
Here’s Where Prices Are Actually Coming Down


Soft landing is not well defined. The OP article defines a soft landing as “inflation is defeated without an accompanying recession”. I’ll call that INDWOR. Some define a soft landing as monetary tightening that does not cause a recession. INDWOR looks at the balance achieved in the Fed’s dual mandate.

Looking at peaks in core PCE (YoY), and the accompanying recession:
inflation peak, recession
Feb-1975, Dec-1973 to Mar-1975
Dec-1980, Jan-1980 to Nov-1982
Feb-1989, none
Sep-1990, Jul-1990 to Mar-1991
Aug-2006, none
Mar-2022, ???

INDWOR in 1989, but then inflation came back in 1990, and so that was only a temporary INDWOR. (Maybe because of the Gulf War.)

INDWOR in 2006. (But the 2008 financial crisis followed closely.)

There are many definitions of economic soft landing:

“A soft landing, in economics, is a cyclical slowdown in economic growth that avoids recession.”

“Soft landings,” that is, cases in which the central bank tightens monetary policy to fight inflation but does not cause a recession (which would be a “hard landing”)

What is a soft landing?
“if the Fed can raise interest rates just enough to slow the economy and reduce inflation without causing a recession, it has achieved what is known as a soft landing. But there is no official definition of a soft landing… The classic example of a soft landing is the monetary tightening conducted under Alan Greenspan in the mid-1990s. In early 1994, the economy was approaching its third year of recovery following the 1990-91 recession. By February 1994, the unemployment rate was falling rapidly, down from 7.8% to 6.6%. CPI inflation sat at 2.8%, and the federal funds rate sat at around 3%. With the economy growing and unemployment shrinking rapidly, the Fed was concerned about a potential pick-up of inflation and decided to raise rates preemptively. During 1994, the Fed raised rates seven times, doubling the federal funds rate from 3% to 6%. It then cut its key interest rate, the federal funds rate, three times in 1995 when it saw the economy softening more than required to keep inflation from rising.”

Are there? These are your quotes:

“A soft landing, in economics, is a cyclical slowdown in economic growth that avoids recession.”

“Soft landings,” that is, cases in which the central bank tightens monetary policy to fight inflation but does not cause a recession"

“if the Fed can raise interest rates just enough to slow the economy and reduce inflation without causing a recession, it has achieved what is known as a soft landing.

While the verbiage from one dictionary/quote to the next may vary, they all have one thing in common, the avoidance of a recession.

But wait, here is where it gets mushy:

Who Decides When The Recession Ends? | Brookings.

The National Bureau of Economic Research (NBER) is widely recognized as the arbiter of starting and ending dates of U.S. recessions

The National Bureau of Economic Research (NBER) is a private, nonpartisan organization that facilitates cutting-edge investigation and analysis of major economic issues.

The methods that NBER uses to determine a recession are subjective, not objective. There is not a formula that they (or the rest of us) can use to definitively shows we are in a recession. Basically, it is their educated opinion.

That means any soft landing will ultimately be determined by the opinion of the 8 committee members of NBER.