E The Fed Assumes A Soft Landing In 2022

“What would it take to knock the U.S. recovery off course and send Federal Reserve policymakers back to the drawing board? Not much — and there are plenty of candidates to deliver the blow. From one direction: U.S. debt-ceiling deadlock, China property slump or simply an extension of Covid caution could hit growth and jobs — taking the Fed’s proposed taper of bond purchases off autopilot and pushing its first interest-rate increase back to 2024 or later. From the other: Sustained supply-chain snarl-ups could keep inflation stubbornly high and unmoor inflation expectations — forcing an acceleration of the taper, and an early rate liftoff in 2022.” (Bloomberg, September 22, 2021)

“The tone of Powell’s press conference (September 22) was more hawkish than the statement itself. The Fed Chair revealed that, in his view, the substantial further progress test that they’d been looking for in order to taper asset purchases has been “all but met”. Moreover, “many” on the committee think it already has been met.” (Taylor Schleich and Warren Lovely, National Bank Financial, Sept. 22, 2021) 

The Federal Reserve’s ambitious soft-landing scenario is highlighted in its recent “median” set of projections of US economic growth. 

As of the fourth quarter of each year, real GDP growth (year over year calculations) is projected to expand at 5.9% in 2021, 3.8% in 2022, and 2.5% in 2023. 

Fed officials also estimate that the American economy will still grow at a rapid 5.9% pace this year, even though the economy slows in the second half of the year as the benefits from previous declining social distancing fades away. Nonetheless, the Fed officials see growth gradually slipping lower to 3.8% in 2022, 2.5% in 2023, and to 2% by 2024. 

The latter year economic growth rate projections are still slightly above the estimated longer-term potential of the US economy. In other words, with monetary policy still assumed to be supportive, real GDP growth though slowing over the next couple of years, will mostly exceed the estimated benchmark rates of expansion.  

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William K. 1 month ago Member's comment

The policies of the federal reserve bankers have been helping those who really don't need the heap and hurting those who are the most suscepable to being hurt. Incomes are rising for those who were already doing well, and this is in turn raising prices for those who were already marginalized. Does anybody else see a problem with that process? What it has been doing for a very long time is assuring that the rich get richer and the poor get the worst of the dregs. There needs to be arather fundamental adjustment in policy.

What will it take to make that happen?? Probably a bit of unpleasantness worse than what we have seen thus far, but I hope not.