After the inflation peaks last year, prompting the Fed to spike its interest rates, economists anticipated a hike in unemployment rates due to the curb in consumer and company spending, however, the unemployment rates hardly budged, and the Fed might achieve a soft landing without triggering a deep recession.
Soft Landing Data Report
Even after the Fed has imposed a fast-paced hike in interest rates in the past several years, and despite economists’ claims that the unemployment rate would hike as high as 7% or more, it remains low at 3.8% since March last year, a significant sign that it might experience a rare and difficult soft landing in reducing the inflation. The possibility of its soft landing was seen in the data where the interest rates have evidently increased, but the inflation rate has drastically decreased from its peak of 9.1% in June the previous year to 3.7%.
The result of this soft landing was far different way back in the 1970s and early 1980s when the central bank’s key short-term rate rose above 19% resulting in a painstaking unemployment rate of 10.8% marking the highest level since World War II. According to current Chair Jerome Powell, since the job market has shown surprising resilience, the soft landing might be a “possible,” if not guaranteed, outcome.
Soft Landing Projections
Following the soft landing possibility, the Fed’s policymakers have made changes to their prior economic projections showing core inflation– excluding volatile food and energy- which amount to 2.6% by the end of next year, down from 4.2% now. Moreover, they are predicting that the unemployment rate will be edging up to just 4.1%– lower than their June prediction of 4.5% for 2024.