Fortune: The Fed Wants a 'Soft Landing' for the Economy. The Market Says Get Ready for a Crash
Article by Will Daniel in Fortune
A soft landing is better than a hard one, especially when it comes to the economy.
It’s the difference between turning the booming Biden years—even with 40-year-high inflation—into a sustainable trend, instigating a mild recession, or something even worse.
The Federal Reserve, the institution caught between a rock and a hard place, got even more bad news on Wednesday: Inflation remains an issue. Although the consumer price index saw a deceleration in April, consumer prices are still increasing at an 8.3% annual rate.
The Fed famously has a dual mandate to promote price stability and maximum employment, and the central bank has been forced to raise interest rates in hopes of bringing down what has proved to be persistent inflation.
The problem is that stocks are throwing a fit. The S&P 500 is now down nearly 18% year to date, and the tech-heavy Nasdaq is faring even worse, plummeting over 28% this year.
There are also growing signs that the housing market is beginning to feel the sting of soaring mortgage rates. And expectations for economic growth are falling too. The Conference Board now predicts the U.S. economy will grow by just 2.3% this year, less than half of what was seen in 2021.
Investment banks, former Fed officials, billionaire investors, and even your neighbor are all predicting economic doom ahead.
While unemployment remained near pre-pandemic lows in April (at 3.6%), the Fed could be stuck with the worst of both worlds if it doesn’t stick the landing. That would be growth halting during the coming recession, unemployment going back up, and inflation not even coming down. That’s the dreaded scenario that recalls the woes of the 1970s: stagflation.
Here’s what will play into just how hard .........
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