"Soft Landing" headlines in both NY Times and WSJ

Since the N.Y. Times and WSJ both have analysts covering the market they often run similar stories. But it’s rare that they have almost identical headlines on the same day.

As Inflation Goes Down, Soft Landing Odds Improve

Latest data suggest a lot of past inflation was transitory

By Greg Ip, The Wall Street Journal, July 13, 2023

The latest data suggest the risk [of infllation and/or recession] is diminishing. Headline inflation has slid from 9.1% in June last year to 4% in May and 3% in June of this year. Much of the latest month’s drop was technical: a surge in prices in June 2022 finally dropped out of the 12-month calculation. Because that won’t be repeated, headline inflation could rise in coming months…

Excluding food and energy, the core CPI was up 4.8% in June compared with 6.6% nine months earlier. Excluding all goods, energy and housing [since nobody buys them, right? – W], the CPI was up just 4% in the last 12 months, and a mere 1.4% at annual rate in the last three months…Wages are still growing at 4% to 5% a year, a percentage point faster than is consistent with 2% inflation. … [end quote]

Everything’s Coming Up Soft Landing

by Paul Krugman, The New York Times, July 13, 2023

The latest numbers on consumer prices arrived on Wednesday, and they were better than even optimists had expected… this report was anything but grim. It strongly suggested that we may be heading for a soft landing — a return to acceptable inflation without a large rise in unemployment…

Supercore inflation, [inflation without food, energy, shelter and used cars] for example, was 3.5 percent over the past year, 2.7 percent at an annual rate over the past six months and 1.1 percent over the past three months…

We might get a recession even if we don’t need one to control inflation. So far the economy has proved remarkably resilient in the face of rising interest rates, but monetary policy often works with a lag, so there might, to mix metaphors, still be a recession in the pipeline… [end quote]

These headlines will encourage stock investors. The Fed is almost guaranteed to raise the fed funds rate in July. But if inflation really is under control (that is, real inflation that includes all the real items that real people actually buy) the Fed is likely to pause for a while.



It’s absurd. If you define “transitory” as “slows someday”, then ALL inflation is transitory. When they used the word “transitory” a few years ago, it was understood that they meant “a less than a year phenomenon”.

The other absurdity is that inflation is cumulative (obviously), so all the inflation that accumulated in prices over the last 2 years is still being carried in pricing. Going back to 2% just means that we carry the extra ~15% forever. If you want to see an average of 2% over the years, you need a bunch of 1% or 1.5% years to “soak up” that extra 15% to return the long-run average to 2%.

I wonder if Bullard is retiring from his fed post due to heated debate regarding the July rate decision? :joy:

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I don’t think the goal has ever been to achieve a “since inception” 2% rate of inflation - and I don’t think it is even possible without MASSIVE deflation. Recall there was nearly a decade of 10+ inflation. It would take a century at 1% or less to get us down to a 2% rate that includes all previous years.

The goal is YOY 2%, not long-run (however long that may be).


Correct! The goal was never deflation.

I’m agreement here. Inflation has been tamed. A bit longer than anticipated or telegraphed. But I think the Fed can start thinking about pausing again. And all this with record unemployment, job creation, and salary increases. This is good news folks.



Prices will never return to their previous levels.

  1. The Fed is terrified of deflation and will do anything to prevent it. Of course, deflation would be needed to return prices to their levels before inflation.

  2. Government deficits are predicted to grow, not shrink. Fiscal stimulus from these deficits will put ever-increasing spending power into consumer pockets. Unless productivity increases enough for supply to meet the growing demand (which is currently is not) inflation will inevitably result.