E Will The US Economy Glide Into A Soft Landing Next Year?

But as the Fed chairman Powell has observed, the last two downturns were also precipitated by financial excesses. The current concern on the financial side centers on corporate indebtedness. Because of a lengthy period of historically low-interest rates, American and European corporations borrowed massive amounts of money, possibly to excess. As interest rates increase and their economies slow down, the corporate debt burden will also increase.

Corporate financial risk has also increased since the US Fed embarked on its balance sheet reduction program, currently running at about $50 billion a month. The European Central Bank (the ECB) is also planning to engage in a milder form of quantitative tightening, which will involve winding down its bond purchases.

An example of a soft-landing US economic outlook is set out in the following projections prepared by Wells Fargo.

The tightening of financial conditions and the fading of the fiscal stimulus are the key drivers of the US and global growth deceleration expected in 2019 and 2020.

Is It Possible For The US Economy Too Have A Soft Landing?

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