The Fed faces tough decisions, geopolitics and commodity markets are a wild card, and it's an election year. There's a lot that could go wrong, thankfully, we have help in landing the plane softly.
I think those that are freaked out over today's inflation report need to understand that not every report will be a rosy one. we are making progress from the calendar year at Dec inflation at 3.4% vs Dec 2022 when the rate was at 6.5%. I do agree plenty of things can still happen especially with 2 wars, the possibility of multiple rate cuts and a giant election coming up. The politics surrounding the economy will always be feckless but we must operate in facts regardless of what party you support.
How do you see US Housing market? Even with all the rate hikes, there is not a major correction in housing prices in most cities. And with rates starting to go down from this year, is there a hope for any further downward revision? High rates did not sufficiently cool the housing market as Demand remained strong. And there's little done on fiscal front to build large scale public housing. How do you housing market 3-4 years from now?
I am not rigid on inflation target. If anything, i would prefer a narrow band of inflation target say 2-4% if you are liberal or 2-3% if you wanna be judicious. Inflation is just one of the parameter to keep track of. Unemployment, wages, growth etc are other parameters that are equally important. And there are even more urgent economic goals of green energy transition which cannot be interpreted in simplistic numbers. Like to achieve reduction in carbon emission by 20240 targets for economy.
Economy is undergoing some major transformations and trying to have exogenous & rigid targets on inflation is not very sensible given all the complexities.
IMO, a successful soft landing is having the PCE inflation for the next 12 months at the 1.5-2.5% rates, with standard real wage growth, unemployment no higher than 4.5%, and decent growth. If PCE inflation accelerates way past 2.5% then I was wrong about what would be needed to bring down inflation. If the other metrics fail, then I would say the Fed over-tightened or didn't cut fast enough (I believe they should bring the interest rate to 3-3.5 by end of year).
I think those that are freaked out over today's inflation report need to understand that not every report will be a rosy one. we are making progress from the calendar year at Dec inflation at 3.4% vs Dec 2022 when the rate was at 6.5%. I do agree plenty of things can still happen especially with 2 wars, the possibility of multiple rate cuts and a giant election coming up. The politics surrounding the economy will always be feckless but we must operate in facts regardless of what party you support.
Poor public sentiment about the economy is promoted by MAGA attitude and disinformation and reenforced by media "neutrality."
I didn't lose my job because of the media but because of a crappy economy in many sectors that some are priveleged not to feel the effects of.
Hello Dr Sahm,
How do you see US Housing market? Even with all the rate hikes, there is not a major correction in housing prices in most cities. And with rates starting to go down from this year, is there a hope for any further downward revision? High rates did not sufficiently cool the housing market as Demand remained strong. And there's little done on fiscal front to build large scale public housing. How do you housing market 3-4 years from now?
Soft landing for who? u3 is Bs
Wealth income disparity vs soft...
How are you defining soft landing? What threshold measure, once crossed, would make you say - "I was wrong"?
A recession and/or inflation stuck around 3% is NOT the soft landing. We have to have 2% inflation and no recession (unemployment low).
I am not rigid on inflation target. If anything, i would prefer a narrow band of inflation target say 2-4% if you are liberal or 2-3% if you wanna be judicious. Inflation is just one of the parameter to keep track of. Unemployment, wages, growth etc are other parameters that are equally important. And there are even more urgent economic goals of green energy transition which cannot be interpreted in simplistic numbers. Like to achieve reduction in carbon emission by 20240 targets for economy.
Economy is undergoing some major transformations and trying to have exogenous & rigid targets on inflation is not very sensible given all the complexities.
IMO, a successful soft landing is having the PCE inflation for the next 12 months at the 1.5-2.5% rates, with standard real wage growth, unemployment no higher than 4.5%, and decent growth. If PCE inflation accelerates way past 2.5% then I was wrong about what would be needed to bring down inflation. If the other metrics fail, then I would say the Fed over-tightened or didn't cut fast enough (I believe they should bring the interest rate to 3-3.5 by end of year).