Economists have debated whether the U.S. economy will fall into a “hard landing” or a “soft landing” as the Federal Reserve has aggressively raised interest rates over the past year to curb inflation, but some now point to a third One possibility, that is, the “non-landing” of economic growth improvement, which may lead to more interest rate hikes by the Federal Reserve.
(Recap:Fed Chairman: If the economic data continues to be strong, we will definitely raise interest rates further! BTC Pin Covering, U.S. Stocks Soaring）
(background supplement:Fed up another size! Bauer: Inflation is slowing down, but it is “not appropriate to cut interest rates” this year）
according towall street journalreport, Economists have been arguing over the past year, arguing that the Fed’s aggressive rate hikes will lead to a “hard landing” for the U.S. economy into a painful recession? Or is it heading towards a “soft landing” of a more modest slowdown in economic growth?
But following last month’s surprisingly strong job and consumer spending data, and signs of stabilization in demand for cars and housing following a slump, some economists are now pointing to a third scenario, economic growth. A “no landing” for the better, which seemed unlikely just a few weeks ago.
Neil Dutta, an economist at research firm Renaissance Macro, said the no-landing scenario is a reality today, and while many Fed officials still expect growth to slow this year, he noted that he found many unwilling to acknowledge an obvious fact,the economy is reaccelerating。
Economic data beat academic expectations
The Fed has raised the federal funds rate by 4.5 percent since March last year to a range of 4.5 percent to 4.75 percent, the fastest pace of rate hikes since the early 1980s, when many economists expected This will significantly depress investment and employment.
However, the job market has been quite strong recently. According to data released by the US Department of Labor this month, non-farm payrolls increased by 517,000 in January, the unemployment rate fell to 3.4%, and job openings as of December last year also increased significantly.
Marc Giannoni, chief U.S. economist at Barclays, said the figures came as a shock to forecasters, as previous data suggested rising interest rates had started to dampen employment, but the latest data suggested that Fed policy was “putting pressure on labor demand.” The momentum is not as strong as we expected.”
No landing might keep Fed on rate hikes
Some economists worry that a pick-up in growth might prompt the Fed to raise interest rates even more before inflation falls back to 2 percent in the next few years. However, Ellen Zentner, chief U.S. economist at Morgan Stanley, believes that “no landing” just means that a “soft landing” or “no landing” will be delayed.
Many economists are still predicting a recession, with some arguing that the Fed had raised interest rates too quickly before the economy had enough time to fully react to their impact. Marc Giannoni, chief U.S. economist at Barclays, predicts:
A recession will occur this fall, not summer, and the Fed will raise interest rates by 1 yard each in March, May and June, bringing interest rates to a peak just below 5.5%, a level last reached in in year 2001.
According to CME data, investors in the interest rate futures market currently believe that there is a 90% chance that the Fed will raise interest rates above 5% in June, up from 45% a month ago, and by the end of this year, interest rates will remain unchanged. There is still a 45% chance of being above 5%, up from 3% a month ago.
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