Dousing the inflation fire
Can the Fed negotiate a soft landing?
Published June 13 2022
Question: Do you expect the Federal Reserve to guide the economy to a soft landing?
R.J. Gallo: The Fed's goal is to try to douse the inflation fire while achieving a soft landing for the economy in the sense that they don't cause a recession. History doesn't suggest that's the most probable outcome. Typically, when the Fed raises rates drastically, the unemployment rate rises. In a sense, the cost of dousing inflation is often a recession. Will this time be different? I'm pretty doubtful that it will be. Seems that the probability of a recession this year is indeed very low, but when we tick over into 2023 or 2024, the risk of recession rises appreciably, as the interest rates shock, the cumulative effect of the commodities price shocks, they all start to really take a toll on the economy.