by Calculated risk 6/19/2025 08:13:00 AM
A year ago I wrote: The art of soft landing
Some excerpts and updated graphs…
The “art of soft landing” requires the Fed to slow down enough to keep economic growth aggressively, slowing it down to the point that it doesn’t rekindle inflation. In my view, soft landing is achieved if growth is positive, inflation returns to the target and yield curves flatten or return to normal (higher yields than short yields).
The Fed’s decline rate and GDP growth were strong in 2024, with GDP growth slightly negative in the first quarter of 2025, due to trade-related distortions, with all indications being positive in the second quarter.
Inflation has not returned to target completely PCE Core Inflation 2.5% of the previous year in April. However, before the trade war began, inflation appeared to be heading towards the Fed’s 2% target.
And here is an updated graph minus a certain maturity of the 10-year Treasury, except for a certain maturity of the 2-year Treasury from Fred over the past five years.
With a major policy change, the Fed did not fully meet my definition of “soft landing,” but that was close – and I think they deserve credit.
