One day after the government reported unexpectedly mild inflation, Christopher Waller, a key member of the Fed’s board, said he needed to see further evidence of smaller price increases before he would be sure inflation is slowing. The Fed’s rate hikes, they note, have made the cost of buying a home, financing a car purchase or expanding a business much more burdensome.Īnd with inflation still not fully contained, Fed officials have yet to sound the all-clear.

Some economists warn that a recession cannot yet be ruled out. Compared with a year ago, core inflation was still a relatively high 4.8%, though down sharply from 5.3% in May. “Core” prices, which exclude volatile food and energy costs, rose just 0.2% from May to June, the slowest monthly rise in nearly two years.

“Now, I think the odds are clearly going up.”Įconomists at Goldman Sachs, who have sketched a more optimistic outlook than most others, have downgraded the likelihood of recession to just 20%, from 35% earlier this year.Įven economists at Deutsche Bank, among the first large banks to forecast a recession, have been encouraged by the economy’s direction, though they still expect a downturn later this year.Įven more encouragingly, measures of underlying inflation have dropped. “I would have been not super-optimistic about a soft landing a few months ago,” said Jeremy Stein, a Harvard University economist who served on the Fed’s Board of Governors from 2012 through 2014. Most economists think this week’s hike in the Fed’s benchmark rate, to about 5.3%, will be the last, though they caution that that rate, which affects many consumer and business loans, will likely stay at a peak until well into 2024. Economists and financial traders have grown more optimistic that what some call “immaculate disinflation” - a steady easing of inflation pressures without an economic downturn - can be achieved. Yet even though the Fed is poised to raise its key rate on Wednesday for the 11th time since March 2022, to its highest point in 22 years, no one is panicking. WASHINGTON (AP) - When Chair Jerome Powell and other Federal Reserve officials gather this week for their latest decision on interest rates, they will do so on the cusp of achieving an elusive “soft landing” - the feat of curbing inflation without causing a deep recession.Īfter the Fed began aggressively raising borrowing costs early last year, most economists predicted it would send the economy crashing as consumers cut spending and businesses slashed jobs and expansion plans.

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