U.S. economy poised for a soft landing. What comes next?

You may have heard the term “soft landing” for the US economy. Let’s take a look at what that means from The Capital Group’s economist: Darrell R. Spence and his take at the end of August.

A great deal of market commentary over the past several months has focused on the potential for the U.S. economy to achieve a “soft landing.” What exactly is that?

A soft landing essentially describes an economy that slows enough to allow inflation to fall, but not so much that it tips into a recession. It is an achievement that many investors doubted could occur two years ago when the Federal Reserve first launched its fight against inflation.

Even I thought the window of opportunity was narrow. However, since then, inflation has come down, job creation has cooled but remains positive, and the U.S. economy has avoided a recession. The inflation battle isn’t over, as it remains above the Fed’s 2% target. However, it is close enough that Fed Chair Jerome Powell all but promised a rate cut during his highly anticipated speech in Jackson Hole, Wyoming, last week.

If the Fed does so at its September meeting, it will be the first rate cut since the COVID-induced recession in March 2020, and it will mark the end of the Fed’s historic two-year monetary tightening campaign that began in March 2022.

Read more from Capital Group on the US Economy here

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